Auto Financing with Bad Credit:  3 Scams and How to Avoid Them

Let's face it, there are unscrupulous and unsavory people in every trade if you look hard enough.  While most Auto Financing with Bad Credit dealers and lenders are honest, hard working folks, there are some that don't mind stooping to underhanded and illegal methods to profit from your unfortunate financial situation. Learn to spot these scams before applying for your bad credit car loan.  That way, you'll know whether or not you are dealing with an honest business.

Spot Delivery Scam

You think, "Wow, this is my lucky day!"

You approached a dealer, perhaps a little nervous about whether or not you'd be able to secure bad credit auto financing.  But hey, wonder of wonders, he gave you a car right away, no hassles at all.  Your poor credit financing hadn't even gone through yet. Your credit must be better than you thought.

Not long after you signed the contract, maybe a couple of days or weeks, someone calls to let you know that your auto financing fell through. They tell you that you have to go back and renegotiate your bad credit car loan. Oh and by the way, your payments and annual percentage rate is going to be higher than what you signed up for.

You have fallen victim to the ‘subject to financing' clause and spot delivery scam.

How to Avoid Falling Victim to the Spot Delivery Scam

• Make sure that you have all your bad credit financing in place before you take possession of any vehicle

• Read the contract carefully and do not sign anything with blank spots.  Insist and ensure that the agreement is whole and complete

• Pre-arrange your bad credit auto financing before you start shopping for your car

• Deal with reputable lenders, not directly with dealers

Extra Fees Scam

Some shady scammers will inflate not only the price of a vehicle, but also your interest rate.  They assume that you are desperate because of your bad credit situation and will agree to almost anything, especially if they can convince you that you have no other options.   They may even tell you that in order to qualify for Auto Financing with Bad Credit, you'll need to pay for a few extra things, such as extended warranties, higher loan insurance or even your VIN etching.  Do not just take the dealer's word for anything like this, because in all likelihood, you are being scammed.

How to Avoid the Extra Fees Scam

• Do your homework!  Know the true market value of the car and what you really need to satisfy a bad credit auto financing lender

• Check or call around to find out the going APR for sub-prime borrowers.  You are considered sub-prime if you have bad credit

• Absolutely do not sign anything until you know without a doubt what kind of impact that loan is going to have on your financial future.  Get another opinion on the contract if you need to

• Always question a dealer if they tell you that you must pay for extra requirements to satisfy the loan criteria.  Stall on signing the contract, if need be, and do a bit of detective work by doing online searches.  Find out if what you've been told is true.

Lie About Your Credit Score Scam

If you know your credit score before heading off to a dealership, then you are immune to this scam.

Just as the name implies, you get so far into arranging your Auto Financing with Bad Credit, when the dealer suddenly informs you that you credit score is too low for the rate that he originally offered.  You'll have to pay a much higher APR because of it.  Unless you know for a fact that he's telling the truth, don't you believe it.  He may be saying that your credit score is much lower than it really is.

How to Avoid the Lie About Your Credit Score Scam

• Get a copy of your credit report and take it with you to the dealership

• If you find or suspect that the dealer is being dishonest, leave the dealership immediately and do not go back

• In case you missed it - know your credit score