Not all lenders are created equal. That’s even more true when you’re dealing with subprime lending or bad credit car loans as there are some lenders out there who seek to take advantage of people in need.
We aren’t like that but appreciate that you might want to check the wider market before working with a lender. Whatever you do, don’t work with lenders who include any of these in their terms:
Car loan application fee
Some lenders may require a fee for processing your loan but the majority don’t. Any lender that requests an application fee is best avoided.
We have heard of numerous lenders on the internet or who work over the phone ask for up to a thousand dollars to ‘show you’re serious’ or ‘show commitment’. These are almost universally a rip off!
Optional extras that aren’t optional
Many dealerships will try to tempt you with extras such as extended warranties or gap insurance but most will take no for an answer. Any lender or dealership that tells you that you have to sign up for such things is ripping you off.
Extended warranties and gap insurance can work for many customers but they won’t work for everyone. They should not be a mandatory part of any car loan negotiation either.
Insisting on conditional finance
Conditional finance is a particularly insidious tool. It is written into some finance agreements, often without the buyer knowing exactly what it is. Conditional finance means a dealer can cancel your car loan if they don’t get the deal they want.
This can result in your driving home with your new car only to get a call from the dealership telling you the finance has fallen through and you have to take it back.
High prepayment penalties
Not all lenders like having loans repaid early. Even though they have to offer the facility, some try to put you off early repayments by charging an early repayment penalty. This is simply an arbitrary charge designed to replace the profit the lender would have made from the interest.
Some lenders use repayment penalties and some don’t. Make sure you know which is which!