How to Avoid the Auto Loan Modification Scam

BBB Auto Loan Modification Advice

It is hard to miss the promises of financial help when things are darkest. The promise shouted from the television, in spam emails, radio, and internet ads. Call today and your debt problems are gone. Settle for pennies on the dollar with the IRS in this one time offer, or settle your credit card debt for half what you owe, or keep your home and end your worries with a mortgage modification, and, the newest twist to the scammers delight, an auto loan modification where your interest rate is reduced, the loan extended, and payments reduced. All these promises are uttered by well-dressed, confident spokespersons. Call now.

Too bad most of the offers are scams. Just because the ad is on TV does not make it legitimate. The scammers come fast, rob, and vaporize into the night, never to be heard from again… until they set up shop in the next town with a different name and new spokesperson that is.

The real problem is that they don’t deliver on their promise. Loan modifications are real and executed every day. The loan modification scam takes your money without doing the work. In this hub I will show you the warning signs of the auto loan modification scam and how you can accomplish what they promise on your own or with a trusted accountant or attorney.

Warning Signs

Scammers walk a fine line between truth and reality. A straight out lie can shut them down fast so they lead you to believe what they don’t say. The illusion that a law firm is making the offer lends legitimacy to the scam. The promise of a “law group” solving your auto loan problem means they hire an attorney for their legal needs, not that they are a “law firm.”

The first sign you are looking into the eyes of a scam is the upfront fee. The scammer has no incentive to do anything once you pay. Not all companies that ask for an upfront fee are scams, but all scams want the money upfront.

The more smooth the promise, the more guaranteed the promise, the more likely the scam. A reputable company will spell out the costs and likelihood of success. Scammers can not afford to lay out the facts. Scammers promise inside knowledge of your lender and promise legal action against said lender to force a loan modification. They promise your loan will get modified with a lower interest rate, loan extension, and lower payments. With over 1.9 million cars repossessed in 2009, there is a large pool of desperate car owners eager to avoid the repo man. Don’t make a bad situation worse by letting scammers at your hard earned money.

Solutions

It is difficult separating the wheat from the chafe. Since it is so difficult I recommend working with a local company or to go it alone. Goodwill Industries is a good starting point as they may have a non-profit organization that works with financially strapped people in their building. Attorneys are expensive, but may be the best choice if you feel your loan is fraudulent, might need bankruptcy protection, or the dollar amount involved is large.

Many accountants are excellent negotiators. I have helped scores of clients over the year negotiate deals. Real estate and business transactions top the list of my negotiations, but I have also helped clients solve debt problems, too. I recommend a local accountant because of contacts. If you call me to help you I will not have all your local resources available. It is also best to sit down together and work through the entire issue. It takes time, but accountants are an underutilized tool for most Americans. The wealthy have no qualms about engaging my services. The wealthy have more on the line, but they have more on the line because they used the right pros to get the job done.

Have you ever has a loan modified?

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Going It Alone

Managing your own auto loan modification is daunting. The difference between you and me working the modification is experience. However, lending institutions just want their money back and most are willing to take a little less if they can convert your non-performing loan to a performing loan. Here are the few simple steps you need to take to modify your auto loan:

  1. Call the Lender: It is simple, yet scary. I understand. With paper and pencil in hand, call or visit your lender. Talk with the lending officer and explain the situation. Be honest and straight forward. A lender willing to modify a loan does not want you repeating the process because you promised a payment plan you are unable to meet. Do not feel embarrassed. I have seasonal businesses that talk with their banker every year during the slow time and get payments reduced to interest only all the time. Modification is not only for the desperate; it is good financial planning. Always remember: Bankers don’t bite. (Except for that one time when…. I’m joking. You know that. Right?)
  2. Prepare Yourself: If you decide to hire a local firm, attorney, or accountant, check their file at the Better Business Bureau. Attorneys and accountant will probably want an upfront retainer. Retainers are not scam. Be certain to check with the BBB before signing or paying anything to a third party.
  3. Large Advance Fees Warning: A reputable firm may want a retainer, but it does not need to cover everything upfront. In my office we require a retainer in these situations because we never get paid if we don’t. Our retainer covers initial costs and is usually small. Be prepared to add to the retainer as it is used to pay fees. A large upfront fee is a large red flag. Scam or not, it is better to avoid companies that require a large upfront fee. They may be honest, but you have too much at risk.
  4. Get Everything in Writing: A verbal agreement or promise holds no weight in court. The lender should have no problem putting their offer in writing. The same goes for third parties helping you. Get a receipt for your retainer and for all services rendered. Loan modifications must be in writing or they are not valid. Keep paying the original payment if possible until the loan modification is in writing and signed by the lender.

 

Final Thoughts

It looks daunting. In some respects it is. It takes work and time. You can work your own loan modification, saving money which you are already short of. Use trusted local professionals. At the first sign of financial stress, talk to your lenders. They want you to keep your loan current. Some lenders are difficult. The sooner you start the process the easier it is to move your loan to another financial institution if necessary. In most cases, the current lender will work out a program with you. They want to keep you as a good customer and you want to keep your car.

Don’t you have a phone call to make?

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