Is Getting a Car Loan Approved Online Within 24 Hours a Sure Sign of a Scam?

A car loan approved within 24 hours of applying is not necessarily the sign of a scam, but there is a good chance you will be dealing with a sub-prime lender. More often than not, these types of loans are from loan companies specializing in sub-prime loans. These loans carry higher interest rates and the terms are much tighter. Be sure to read all of the documentation, especially the fine print, very carefully. The first place you should go for a car loan is your primary bank or financial institution. Loans from these lenders normally have the best rates and are these are the safest type of lenders. A dealer may be able to arrange a loan for you, as well.

The Internet is full of legitimate, as well as illegitimate lenders. Securing a loan online is fast, convenient and you may never have to step foot in a bank. Scammers, unfortunately, take advantage of borrowers looking to secure an auto loan online. It is quite simple for just about anybody to set up a legitimate-looking website. Always research the site. Make sure it is in good standing with the Better Business Bureau and other security organizations before you give out any sensitive information.

Some common online loan scams to look out for:

The Guaranteed Approval Loan Scam

When a lender claims you are absolutely guaranteed a car loan, keep in mind the old adage “if it seems too good to be true, that’s probably because it is.” Claiming every loan is guaranteed to be approved, without even knowing who you are, they entice people to apply. These people usually know they won’t be able to get a loan from anyone else. This method separates people with financial difficulties from money they can’t afford to lose.

The Co-Signer Required Scam

This scam is tricky. People with poor or no credit could very well need a co-signer at a legitimate institution to secure a loan. Even your own bank might require a co-signer. But an unscrupulous car loan lender will say you must find a co-signer. They already know you can’t get approved at regular institutions, otherwise you wouldn’t bother with their site at all. You know it isn’t unusual for a lender to ask for a co-signer and this could help you reestablish your credit. But, instead of just being a co-signer, the lender puts only the name of the co-signer on the loan. This won’t do anything to help your credit, but it could cause some serious problems. Even getting car insurance could be a problem. It also places the entire burden of repayment onto your co-signer. Carefully check over all documents to make sure both names appear on everything.

Up-Front Fees Required Scam

If an online car loan lender asks for any fees to be paid up-front or asks for the down payment up front, run! This is straight out theft. This is a major red flag. After they get your money, you likely will never hear from them again.

The Low Credit Score Scam

Whether you apply for a loan online or in person, know your credit score. A popular scam is to tell you your score is too low to qualify for the best rate. They don’t know you and they don’t know your credit score, but you should! The assumption is that if you are looking for an online loan you either don’t have stellar credit or you don’t know your score. Know your score before dealing with any type of lender.

Change of Terms Scam

Unfortunately, this is a popular car dealer loan scam, but scammers do it with online loans, as well. Your friendly dealer helps you get financing. After you have been assured the loan was approved, in some cases you might already have possession of the car, then the lender calls. They say there was a problem and the loan never went through. But, not to worry, they can give you a loan. The interest will be higher, though. They assume you would rather pay the higher rate than to return the car. The best thing you can do is return the car. Refuse the loan and try again with a more reputable lender.

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