Car loan scams in Canada & how to be safe. Vehicles have become one of the necessities in life, especially for many Canadians. Several people are considering purchasing one due to the ease it offers. Yet vehicles are pricey, and not everyone can afford to buy them. As a result, some people take out a car loan to acquire one. With the popularity of car loans, which you may obtain from dealerships, banks, or online, car loan scams are also common.
Anyone can be a target of loan scams such as car loan scams. With our advanced technology, fraudsters or scammers can easily victimize anyone. Financial debt is an unavoidable fact of life in today’s world. The average Canadian uses loans to buy a vehicle, buy a house, fund education, and keep their credit score high. Also, they are assisting an increasing number of Canadians in navigating difficult economic circumstances. But this does not imply that loans are risk-free. The significant risk of all is whom you choose to borrow from.
How high risk is it? Just look at the numbers: Every year, Canadians lose an average of $100 million or more to scammers, but the Better Business Bureau believes that the amount is likely to be far higher, perhaps in the billions, as only around 5% of victims come forward to report the crime.
A loan that is provided under pretenses is a loan scam. Scammers frequently entice victims by making grand promises they can’t keep or concealing the overall cost of the loan. There are different loan scams, such as car loan scams, student loan scams, personal loan scams, and mortgage loan scams. Here, we’ll discuss car loan scams and how to be safe from them.
Car Loan Scams in Canada & How to Be Safe
What are Car Loan Scams?
An unethical, dishonest, or illegal operation that takes advantage of car purchasers who need financing is known as a car loan scam. Car loan scams can happen online and at automobile dealerships. Scammers frequently target automobile owners who are behind on their payments and want to prevent having their vehicles repossessed. Consumers may suffer harm as a result of auto loan fraud. Automobile owners can end up paying high-interest rates or being forced to return their vehicles without getting back their down payment.
Car Loan Scams you should watch out for.
Yo-Yo Financing Scam
Yo-yo financing is a trick many car salespeople employ to get you into a new vehicle. And off the lot the same day you walk in, regardless of whether your loan is approved or not approved. In this scam, dealers will contact you days after you apply for a car loan and inform you that your application was denied. You’ll be required to return the vehicle, and your down payment may not be refunded. Lenders will advise you to consider purchasing a different vehicle at a higher rate once you return the vehicle.
How to avoid: Get your finance approved before you go to a dealership. This indicates that you will already be accepted and won’t require dealership loans. And while you’re at the dealership, check your contract for anything that states that your loan is subject to approval. A dealer shouldn’t let you leave the lot unless they are confident in your ability to make the payment.
Guaranteed Loan Scam
If a vehicle loan provider tells you that you are guaranteed to get a loan, keep in mind the saying that goes, “If it seems too good to be true, it probably is.” Those who know they can’t get a loan somewhere else or buy a car in any other way apply because they are led to believe that all loans are assured to be approved. It’s a technique for taking even more money away from folks struggling with money issues already.
How to avoid: Stay away from any dealership that offers guaranteed approval on a car loan.
This is tough since persons with bad or no credit may require a co-signer to obtain a valid loan, even from their local bank. Yet, some dishonest auto loan providers may advise you to get a co-signer because they know you would not be authorized for the loan. You believe that the co-signer will aid in your loan application and subsequent loan approval. And help boost your credit. Yet, the lender places the entire loan in the co-signers name, which won’t improve your credit and may result in insurance issues. Additionally, it places your co-signer under whole financial responsibility for the debt.
Cosigner Scam
This is tough since persons with bad or no credit may require a co-signer to obtain a valid loan, even from their local bank. Yet, some dishonest auto loan providers may advise you to get a co-signer because they know you would not be authorized for the loan. You believe that the co-signer will aid in your loan application and subsequent loan approval. And help boost your credit. Yet, the lender places the entire loan in the co-signers name, which won’t improve your credit and may result in insurance issues. Additionally, it places your co-signer under whole financial responsibility for the debt.
How to avoid: Thoroughly review all paperwork before signing anything, and never sign contracts separately. Ensure both of your names are listed on the application.
Car Loan Fees Scam
Here are some car loan fee scams:
Upfront Fees. When lenders demand payment in advance before processing an auto loan application, this is an upfront fee scam. Such scams can happen online, and once you pay the advance fees, you cannot even receive the loan or hear back from the lender. How to avoid: Stop communicating with and report any lenders who want upfront fees. Reliable lenders won’t demand payment in advance of signing a deal.
Packing Payments. It’s called a “packing payments scam” when a dealer raises the total cost of a vehicle loan by introducing add-ons like supplemental insurance packages that might earn the dealer extra money kickbacks. How to avoid: Focus on the purchase price of the vehicle rather than the monthly payment. Bear this in mind. And the salesperson won’t have any room to add extras.
Car Loan Modification Scam
A car loan modification scam is a fraud that takes your money without giving you anything in return. Scammers who claim to be able to modify your auto loan make empty promises. They’ll promise to negotiate with the lender in exchange for a small upfront charge, typically a few hundred dollars. If something seems too good to be true, it probably is, as with most things. Loan modification scam victims are frequently instructed to stop making payments to their lenders since the loan modification organization would handle the talks. After paying for the service, the victim can’t contact the company. In addition, they frequently neglect to verify your credit score and may put pressure to sign a contract.
How to avoid: Avoid companies that offer to modify your loan. If you’re having trouble making your payments, speak with your lender immediately and let them know. Many are ready to postpone payments or lengthen the loan’s term.
Credit Score Scam
Your credit score affects the loan interest rate that you will be given. One of the most typical scams involves a lender telling you that your credit score is lower than it is to raise the interest rate you are charged for the vehicle loan. They presume others don’t know their score and won’t doubt it.
How to avoid: Know your credit score before you apply for car financing anywhere, whether online or in person. You can check your credit score from two main credit bureaus in Canada: Equifax and TransUnion.
What to do if you’ve been scammed?
- Report to the Canadian Anti-Fraud Centre. File a complaint with your provincial Consumer Protection agency too. Involving your local consumer protection organization will help if you want something to change. Click here for a complete list of Canada’s provincial and territorial consumer protection agencies. You can even report the scam to the Better Business Bureau.
- Give your bank or credit union a call. This can be a required action, specifically if you were the victim of a loan modification fraud. To stop withdrawals, ensure your bank or credit union locks your account.
- Get in touch with the main credit bureaus. Let TransUnion and Equifax issue a fraud alert for your credit reports. With this, you can stop any new credit accounts from being opened under your name.
- Change your passwords. Change your passwords for all your significant financial accounts if you applied for a vehicle loan online and afterward realized it was a scam.
- Report the incident to the police. Police should be notified about a nearby dealership operating a fraud so that they can be prosecuted for their unethical actions.
- Make contact with elected officials. If enough people protest, local and even federal regulations may be changed.
How to Recognize a Trustworthy Company
When in doubt, take the time to make sure you’re doing business with a legitimate company. Before making a commitment or disclosing personal information, look for the following indicators of a company’s legitimacy:
- Better Business Bureau reports or other official ratings.
- Positive Online Ratings and Reviews
- Using proper grammar and professional communication
- A website, phone number, and physical address that you can independently check online without visiting any links in an email or text message.
How to Protect Yourself from Car Loan Scams
Be vigilant all the time. Do some research first before dealing with any company. Arrange your financing beforehand, and know your credit score. If you are to sign a contract, please ensure you have read everything and understand what you are signing.
Ready To Apply to a Reputable Car Financing Company?
If you want to get approved by a reputable car financing company, fill in our secured mobile-friendly online credit application form. Edmonton Auto Loans have been helping many Canadians with their car loans for over a decade. We’re networked with the top financial institutions in the country and get you the best financing options suitable to your needs. If you need proof of our quality service and offers, check out our google reviews. For more information, call us here at 1-855-227-1669. To estimate and calculate your car loan payments, click here.