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Predatory Lending on Car loan?

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jiffylaw

Junior Member
My mom purchased a car on her own and i think she really got the dirty end of the stick. She has had the car for over a year now and is now coming into troubles paying the payments. I investigated into the terms of the loan thinking that i might just purchase the car for her. When i heard the terms it was unbelievable!! She has only been 1x30 late since the start and bought the car for 24k. And she still owes 23,000 on the car. Interest rate is 21% :eek: With such a ridiculous interest rate she was only able to pay down the principal about 1k. I blue booked the value and its between 16k-17k. . I'm in the mortgage industry and i would call that predatory lending.
Seems like the financially logical thing to do is let the lender have the car back. Its just not worth continuing the payments on that hunk of junk.
 


jiffylaw

Junior Member
I guess my question is, Could this be considered predatory lending?
Also, is there any way to have the lender take back the car without it hurting your credit significantly?
 

BoredAtty

Member
I guess my question is, Could this be considered predatory lending?
Also, is there any way to have the lender take back the car without it hurting your credit significantly?
You don't say what state you're mother is in, so we can't look it up, but in my state a lender can charge up to 24% for a car.

As for the lender taking back the car: Your mother will need to default on the loan for that to happen, and thus, her credit will be destroyed. The car will be repo'ed and most likely sold for less than bluebook value. Your mother will then owe the difference between the loan balance and the sale price of the car, and she will be charged the same 21% rate on the unpaid balance.

Better alternatives: (1) Sell the vehicle herself and pay off the unpaid balance. (2) Refinance the vehicle.

You already suggested that you may do (1), so that may be best for her since I assume that refinancing will be tough (or she wouldn't have been paying 21% in the first place). Of course, you could always refi it in your name (or at least co-sign) for a lower rate.
 

jiffylaw

Junior Member
Thanks BoredAtty. The car was purchased in California. If Maryland will allow 24% interest rate then it seems these exorbitant interest rates are part of the industry. Seems a shame that the industry doesn't have more regulations to protect the consumer.

BTW, have you heard of any instances where the lender is willing to renegotiate terms. If they repo the car they're not going to get full value and have to go through some hassle. Just seems like good business sense.
 

BoredAtty

Member
BTW, have you heard of any instances where the lender is willing to renegotiate terms.
Sure...A few years ago I refinanced my car with the same lender for a better rate. But I wasn't making threats of non-payment. Instead, I had just received a large raise at work which qualified me for a better rate. Still, I would talk to the lender and see if any solutions are offered. As you said, the lender may want to avoid some hassle.
 

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