Is Guaranteed Auto Loan Approval a Scam?

There is a good chance that you have seen an ad for a guaranteed auto loan approval at some point in your local market. Many car sellers use these types of promotions to boost sales. While a guaranteed loan approval sounds great, it may not be as good of a deal as you had hoped. In fact, many people believe that a guaranteed auto loan approval program is actually a scam. Here are a few things that you need to be aware of with a guaranteed auto loan approval program.

Appeal To Those With Bad Credit

The entire purpose of running a program like this is to attract those who think they have limited options. When you have been through a bankruptcy or foreclosure or some other credit problem, you do not think that many people will approve you for an auto loan. For this reason, you do not shop around for a new car. 

Car dealers know this and as a way to stir the pot of potential customers, they put out these ads. Those with bad credit see the ads and come into the dealership. Car dealers love it because it gives them more opportunities to sell cars. However, these programs are not always in the best interests of those with bad credit.

High Interest Rates

The first thing that you will have to watch out for with guaranteed auto loan approval programs is high interest rates. The interest rates that these companies charge are extremely high. The rate that they give you for a car loan may be two or three times as high as a typical car loan rate may be. Therefore, you might think that they are trying to help by giving you a car when no one else would. In reality, they are just compounding your problems because now you have a huge interest rate on a car loan. Your payments may be higher than you can afford, and you might be causing yourself even bigger credit problems than you were already in. 

Guaranteed Approval

Making a promise like "guaranteed approval" seems like a pretty tall order. There is no way that a legitimate lending company could finance everyone in the world. Some people represent way too big of a risk to take on. Therefore, if your credit is completely destroyed, you may not be able to get approved even by a "guaranteed approval" program. Would you really expect someone that just filed for bankruptcy yesterday to be approved by any lender? 

Another way that you may not be approved is if the car company knows that you cannot repay the debt. If you do not have any income coming in, they are not going to be able to approve you. They want to know that there is at least a decent chance that you will repay them.