The Expert Podcast

We're seeing a lot of scam companies out there offering auto loan refinancing—not modification, but refinancing. The Federal Trade Commission (FTC) has a really good article about these kinds of scams, how to recognize them, and how to avoid them.

Are you having trouble paying your car loan and thinking about doing business with a company that promises to get you a loan with lower monthly payments? That's the key—you can't get a lower monthly payment on a car loan. It's not something that you can do. You can do a short sale or a loan modification for a different amount, but you're not going to get lower payments.

The scam works like this: The refinancers promise they'll get you lower payments, but you have to pay them the car payments. What they tell you is to stop making car payments while they negotiate. Then, they tell you to make your loan payments directly to them, claiming they'll pay the lender for you. It's a total scam. Don't pay your car payments to anybody except for your lender.

You shouldn't stop paying your car payments at all. The scammers will tell you that they have a special relationship with the lenders, but no auto refinance company or loan modification company has a relationship with the lender. They're just doing something on your behalf—something you could do yourself. Everything that a loan modification company could do, you could do yourself if you wanted to.

We give you the instructions where you could do it yourself. If you can't afford your payments, auto loan modification involves pushing missed payments to the end. That's probably not what you want to do. However, your lender may offer to take your vehicle back and forgive the difference in the loan. That’s what you want to do—you want to do a short sale or a loan modification so they forgive the loan.

This is a big difference compared to lowering payments. Also, regarding repossessions, you might still owe money after the car is repossessed. You could be on the hook for any difference between what the lender gets for selling the car and what you still owe on it. This is called a deficiency judgment. This is why we don't recommend doing a repossession—because you're letting the lender sell the car, and who knows what they could sell it for? They could sell it for a dollar, or it could go to an auction where there are no bidders.

You want to have control over the sale process. We can even get you some bids on your car. You could sell it yourself on eBay, Craigslist, or Facebook. These are really good lessons on avoiding auto loan refinancing scams, so you don’t add an additional loss. If you're going to lose money on your car and you can't afford your payment, that's one thing. But you don’t want to throw good money after bad by falling for a scam trying to get you out of your car loan.

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