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How To Spot A Bad Car Loan In Georgetown

How To Spot A Bad Car Loan In Georgetown

We wish all auto loan companies were as straightforward as we are but it’s not the case. The market is full of good and bad loans and its up to you to decide which is which. So, how can you spot a bad car loan in Georgetown?


Who better to ask than our very own Georgetown auto loan team?


There are a few warning signs that can help you spot a bad car loan. What you’re looking at may not be the deal you think it is. Check for each of these before you sign.


Lots of extra fees


There are fees involved with buying a car but the fees within the auto loan should be minimal. There may be an arrangement fee for setting everything up but there shouldn’t be much else.


If you see any extra fees that weren’t part of the original negotiation, question them and be prepared to walk away if you don’t get satisfactory answers.


A Bad Car Loan Includes High Prepayment penalties


Some Georgetown auto loans will come with a prepayment penalty for the first year or two. This is usually equal to the amount of interest they would earn in that period.


If the prepayment penalties seem unfair or excessively high, question them, renegotiate them or walk away.


If in doubt, compare the penalties with other loans of a similar type and value. If the loan you’re looking at seems excessive, don’t sign.


If the paperwork mentions conditional financing


Conditional financing is designed to benefit one party, the dealership. Also known as ‘yo-yo sales’, conditional financing is a system where a dealership can agree an auto loan and then rescind the offer at any time citing ‘they were unable to make it work’.


These types of car loans rarely work out well for the customer so they are best avoided. Look for terms like ‘conditional financing’, ‘conditional delivery’ or ‘spot delivery’ in the contract.


The loan terms differ from preapproval


Auto loan preapproval is designed to test whether you could qualify for the auto loan you’re applying for. It should provide an estimate of the interest rate and term of the loan as well as the amount being borrowed.


If the loan you’re signing for differs from that by too much, question it. Remember that preapproval is an estimate or quote and not an offer. You can expect a small deviation in interest rate but not by too much unless your circumstances have changed in the meantime.


If the interest rate is far higher or anything else has changed, question it or walk away.


Mandatory arbitration clauses


Mandatory arbitration clauses can be written into any contract but are common with auto loans. They mean that rather than suing the company if something goes wrong, you have to go to arbitration instead.


Arbitration isn’t always fair or unbiased and may involve closed door judgements. It’s best to avoid this type of clause wherever possible.


If you see an arbitration clause, ask for it to be removed or try a different loan.


Contact Unique Chrysler for help, advice and competitive Georgetown car finance and leasing.


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Categories: Auto Loan

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