Predatory loans used to be a huge problem for home mortgages before the federal government outlawed many deceptive lending practices. In the auto industry, the practice of hooking people into auto loans that can cause financial damage is far too common.
Predatory Loans in the Auto Industry
Predatory loans are loans that deceive the borrower by imposing unfair loan terms. This is often done by convincing a borrower that the lender’s terms are financially affordable. Once the borrower has agreed, the lender uses the borrower’s inability to pay it back over time for their own profit.
A common example is the yo-yo tactic, where the buyer leaves a dealership with a car, only to be informed later that there was something wrong with the original deal and the car must be returned or they must agree to higher interest rate.
Predatory loans have worsened with the involvement of some big banks. These banks will buy car loans and sell them to insurance companies. When a bank has partnered with an auto dealer to buy the loan, defaulting on the loan can be worse for the buyer.
Predatory loans work by:
Convincing the borrower that they can pay more
Allowing the borrower to accept a high interest rate
Involving terms that are unfair to the borrower
Driving down the sale value of the car while increasing the amount owed
When those with a predatory car loan wind up in bankruptcy, the resale value of the car is usually significantly less than what the borrower owes, meaning a sale of the car won’t reduce debt.
If you have been involved in a predatory car loan that has pushed you into bankruptcy, contact a bankruptcy lawyer right away. A bankruptcy lawyer can help you begin to repair your debt and regain your credit. Call the attorneys at the Malaise Law Firm today!
Categories: Vehicle Bankruptcy, Bankruptcy and Life, Bankruptcy