Financial uncertainty can hit anyone at just about any time. The sudden loss of a job, unexpected medical expenses and divorce can all lead to monetary hardship. But there are ways that Texans can be taken advantage of, which can cause them to be more susceptible to overwhelming debt burdens.
This is especially true when it comes to car loans. While most loans through banks are only made when an individual meets certain income requirements, other types of car lending are predatory and seek to loan money to individuals at high interest rates with the constant threat of car repossession if expensive payments are not made on time.
There are many ways that predatory car loans are made. First, a loan can include a dealer kickback. Here, a car buyer is enticed with an initial buy interest rate, but is then taken by surprise when the lender allows the dealer to change the interest rate. Many of these dealers are eager to do so, since they often get a kickback from the higher interest rate.
Second, buyers should be wary of dealerships that have in-house financing. These dealers often promise financing to those with bad or no credit, but the interest rates given on these loans is often extremely high. This business model predicts multiple repossessions, so dealers require higher down payments so that they can make as much money as possible up front. They then expect to resell the vehicle multiple times after it has been repossessed from those who cannot afford it.
These are just a couple of the many ways that Texans can find themselves in financial trouble when seeking car loan. Of course, many who seek vehicles in this fashion may already be facing financial difficulties. These individuals may want to consider the debt relief options available to them, as they may be able to eliminate or reduce their debt load to protect their financial future.
Source: Center for Responsible Lending, “Signs of Predatory Auto Finance Loans,” accessed on March 19, 2017