Most car sales professionals are honest, hard-working people with a job to do. Unfortunately there are a few who fit the bill of the “stereotypical” car salesman and will do everything they can to sell you a car. If you apply for finance through the dealer, this just gives the car salesman another tool to use against you as leverage. Instead, walk onto the lot with online auto loan quotes in your hand and you may be surprised at the difference in how you are treated.

Credit Report Shenanigans

Of course you would never shop for cars without pulling your own credit report, right? Well some people do and that gives the dealer a chance to tell stories.

They’ll tell you how you have a terrible credit score and then act like they are doing you a favor by giving you a loan at all. Of course they will have to charge you a higher APR and possibly additional fees for the terrible risk they are taking.

Understand that they will tell you this even if your credit score is perfectly fine.

Your Loan was Rejected

You sign papers and drive off, thinking you own a new car. Then a couple of weeks later, the dealer says the financing fell through and you have to come back in. They’ll hit you with higher payments, refinancing fees, and all kinds of other nonsense.

Unless you lied on your application, the dealer knows whether you qualify for the loan or not before he lets you off the lot. Do you really think he’s going to let you drive off in a $25,000 piece of merchandise otherwise?

Applying for a Loan by Accident

Even shoppers armed with online auto quotes aren’t immune to loan scams. The car salesman may tell you that he needs to pull a credit report because of Patriot Act reporting requirements. You might even notice the form you are filling out is titled “Application for Credit.”

The Patriot Act does not require a credit report or your Social Security number so don’t be fooled into applying for dealer financing. Your name and driver’s license number should be all they need.

Lies About Online Car Loans

Some car dealers are so threatened by online auto loan quotes that they will tell you anything to get you to abandon them in favor of dealer financing.

One of the common lies is how all online car loans are scams and their checks will bounce. Yes, there are a few bad apples among online lenders, but they are generally easy to spot. Most companies that offer online auto loans have been in business for years and are just as reputable as your bank or credit union.

The best way to protect yourself against these and other loan-related scams is to get your online auto loan quotes before going to the lot. That way you know what you have qualified for and don’t have to worry about the dealer using your loan against you.

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Consumers complain, and rightfully so, about credit card interest rates that average 19% per year and go up from there. Those rates are certainly higher than those charged by banks, were personal loans can often be had at half of that rate, provided that your credit is good. On the other hand, credit card interest rates are bargains when compared to those charged by payday loan companies, where interest rates can often exceed 400% per year. Consumers usually take out such loans, which require repayment in two weeks time, only when they have no other lending options available to them, such as when their credit card balances are full. Four hundred percent per year sounds completely insane, until you consider that there is a form of lending that is potentially even more expensive – the car title loan.

Car title loans work much like payday loans and have similar terms. Payday loans are short-term loans, usually two weeks in duration. The borrower pays a fee, which amounts to interest, that can average between $15 and $30 per $100 borrowed. If the loan is repaid in two weeks, the loan is retired. If the loan is not repaid, the borrower can usually renew it for another two weeks by paying the fee a second time. This is known as rolling over the loan. These loans have no collateral required; proof of a bank account and steady employment is usually enough to secure the loan.

Car title loans differ from payday loans in that the loan is secured by the title to the borrowers car. The duration of the loan is typically 30 days rather than two weeks, but the loans often work the same way. At the end of the loan period, the borrower can either repay or roll over the loan for another month. The difference, and it is a big one, is that failure to repay a car title loan allows the lender to repossess the borrowers car! At that time, the lender may sell the car and keep they money that they are owed. Most states require the lender to return any extra funds, but some states actually permit the lender to keep all of the money.

One would think that by requiring collateral in the form of a car title, the lenders could offer loans at a more affordable rate than those offered by payday lenders. They probably can, but in practice, the interest rates are very similar, which makes a car title loan a very risky way to borrow money. Most people need their car to get to their job; if your car is gone, so is your opportunity to repay the loan or to buy another car.

Lawmakers in various states have been trying to crack down on the growing car title loan industry, but they often meet with resistance from industry lobbyists and Republican legislators who think that the free market should decide how lending businesses work. Unfortunately, the free market is not available to most car title borrowers, who only go to such lenders after they have exhausted all other borrowing avenues, such as banks, credit cards, and even payday loans.

The bottom line is this – No matter what the interest may be, putting up the title to your only means of transportation as collateral for a $500 loan is a bad idea.

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