Since 1992, the number of subprime car loans has skyrocketed, showing no sign of slowing down even since the housing collapse. But for post-bankruptcy debtors, the subprime lending industry could cost them their financial fresh start.
Below are a few things post-bankruptcy debtors should watch out for:
Hidden Charges
Post-bankruptcy debtors looking to purchase a new or used vehicle can end up dealing with shady companies which make some of their profit from sneaking in surprise charges. To avoid this, take the time to thoroughly read the contract before you sign it. Ask the car dealer to explain any charges you don’t understand and if they don’t give a clear answer be prepared to back out of the deal. Hidden charges are a real problem because not only does it increase the cost of your vehicle, it has to be financed so it increases the cost of your loan.
Falsified Documents
It’s as if we didn’t learn our lesson during the housing bust, falsifying documents is bad business for everyone involved. For debtors exiting bankruptcy, allowing a car dealer to send falsified documents to lenders can mean you end up with a loan that you can’t afford. Trying to pay an unaffordable loan could mean default and a second bankruptcy if you’re not careful. Look over any documents sent to a lender beforehand and ask for a copy. Don’t sign anything that isn’t true.
Fake Car Values
It’s unfortunate but some car dealers are simply lying about a vehicle’s value, so it’s up to the post-bankruptcy debtor to check the car’s value in the Kelly Blue Book before buying. Do not purchase any vehicle whose price is overinflated because if you default at a later date, you may end up owing a deficiency balance even after the dealer auctions the vehicle.