Consumers taking on auto loans have maintained a protection as ordered by a U.S. District Judge yesterday. Auto dealers, who recently fought their responsibility in sharing bad?credit history with consumers who face higher interest rates but finance through third-party lenders, lost the battle.
Dealers Required to Inform Borrowers Seeking Auto Loans
U.S. District Judge Ellen Huvelle issued a ruling on Thursday?that maintained guidelines?for auto dealers looking to charge their customers interest on auto loans due to a bad credit history.
After a tough debate between the National Automobile Dealers Association (NADA)?and the Federal Trade Commission (FTC), Huvelle ruled that auto dealers must tell buyers they have negative information on their credit report for all auto loans issued.
Prior to Huvelle?s ruling, the law required that auto dealers who offered loans had to tell buyers if they?d have to pay more in interest because of flawed credit history. The?NADA argued the law exempted sharing the information if the loan was originated by a third-party lender like a bank or finance company, instead of through dealership financing.
The FTC argued that auto dealers are still responsible for sharing the information with consumers and Huvelle agreed. As a result, dealers will still be required for providing the notice.
Bad Credit History Doesn?t Have to Result in Excessive Rates
Taking on auto loans can be challenging if you have a bad credit history. Not only do you have to contend with higher dealer interest rates, but in many cases, you have to hope you will be approved for a loan at all.
The good news is there are some ways to reduce your chances of being stuck with excessive interest rates when financing a car and?each one involves?avoiding dealership financing. Here are some tips to consider:
- Talk to your credit union: While your credit union looks at your credit history to determine eligibility for an auto loan, the rates on credit union auto loans are usually much cheaper than those you?ll be offered at a dealership.
- Consider peer-to-peer lending: There are several reputable peer-to-peer lenders that help you find individuals willing to dish out personal loans at interest rates much lower than what an auto dealer would offer.
- Look at your home equity: Another option to consider is acquiring a home equity loan that can help you secure a low interest rate and even possibly give you a tax break. Of course, if you are unable to repay your loan, you could lose your car and home, so take this option at your own risk.
If you are interested in securing an auto loan with a dealer, it?s important to know they?re now required to share your bad credit history as a reason that your rate is high, no matter who finances the loan. It?s even better to know that you could secure a more affordable loan by looking into other options.
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