Can’t pay off your auto loan? One option is to refinance, taking out a new loan with different terms to pay off your existing one. In the best-case scenario, refinancing results in a lower interest rate and monthly payment, along with a shorter loan term, especially if your credit has improved since your first loan was approved.
Although there are many legitimate refinancing options available, there are scammers out there eager to get your money and pocket it for themselves. In this article, we’ll tell you how auto loan refinancing scams work, how to avoid them, and what to do if you’ve fallen for one.
Auto loan refinancing scams are when people pretend to be lenders, promising customers lower rates through refinancing. But really, they just take people’s money and give them no financial services in return.
Auto loan refinancing scams begin with false advertising, plain and simple. The ads may include:
You’ll find these ads online, in a magazine or newspaper’s classified section, or even on flyers posted around your neighborhood.
Once people respond to the ads, the scammer might tell them to stop making car payments to their current lender, pretending that negotiations are in progress. They may charge the unsuspecting victim an “enrollment fee” or “application fee,” often several hundred dollars. Customers may not find out they’ve been scammed until they receive a notice from their lender about missed payments or, worse, their cars get repossessed1. What a rude awakening!
Fortunately, if you know what to look for, auto loan refinancing scams are completely avoidable.
If you spot any of the following signs, the purported lender probably isn’t legitimate.
Preapproved or prequalified offers are illegal, but saying a loan is guaranteed before you’ve applied is not.
If the supposed lender sends you a website link, you can make sure it’s legitimate by checking for a padlock symbol next to the URL in your web browser. The URL should also begin with HTTPS3.
See if the lender is registered with government agencies.
Google the lending company’s name with words like “complaint,” “scam,” and “review.”
If you get a call from a random number and it’s a recording, do not give out any personal information. Instead, hang up immediately.
A legitimate lender will never ask for any money in advance of providing a loan. Never pay an upfront fee, which is a key sign of car loan scams.
If you paid the scammer in cryptocurrency, the transaction is most likely not reversible. However, if you paid through a crypto exchange, you can try contacting that company to get your money back.
Auto Loan Refinancing Scams. FTC Consumer Advice. (2022).
Predatory Loans and Loan Scams. New York State Department of Financial Services. (2022).
Car Buying and Personal Loan Scams. Navy Federal Credit Union. (2022).
How do I find my state’s bank regulator?. Consumer Financial Protection Bureau. (2022).