What to Do if You Can’t Afford Your Car Payment

We all hit hard times. Trying to make ends meet and pay bills while still balancing a happy, healthy life can be difficult at any time and be nearly impossible at the worst of times.

What happens, however, when the balance sheet is just not adding up? What do you do if, when this happens, the one big red area that you know you simply can no longer afford is your vehicle?

We know that having a vehicle is an important part of your life. You have to get to work and get your kids to school. You also have to be able to go to doctor appointments and run errands.

Unless you live in a major metropolitan area with adequate public transportation, going without a car simply isn’t always an option.

So what do you do when you can no longer afford your car payments? Let’s take a look at some of the things you can do to remedy the issue quickly. We’ll also look at how you can avoid it in the future.

Act Quickly

There is no use in sitting on the news. Once you realize that you’re going to have trouble making your auto payments, it’s best to leap into action quickly.

Take steps early to ensure that you can keep your vehicle. As a last resort, you want to be able to get out from under your payments.

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Call Your Lender

It is important to realize that, from a purely cold economic standpoint, lenders make the most money when you successfully make your car payments. That’s the case even if this means they have to work with you to achieve that goal.

Reputable auto lenders do not want to repossess vehicles. They also don’t want to deal with bankruptcy courts. It is expensive and is against their business model.

So, the first thing you should do when you realize you’re having trouble making your payments is to get your lender on the phone. Let them know that you’re having trouble making payments and that you need some assistance.

There are often several ways they can help you. This includes deferring payments. That entails giving you a break of a month or two. They would then tack on the payments on the end of the loan.

Some lenders will also let you make smaller payments for a shorter period of time.

Note however, that these tools will only help you temporarily. If you’re having ongoing financial issues, it may be appropriate to continue reading.

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Trade in Your Vehicle

Trading in your current vehicle for one with a lower overall value might allow you to make a large down payment. It can dramatically lower your monthly payments.

If you trade in a vehicle that is worth $8,000 for a vehicle that only costs $5,000, you can drastically lower the amount you pay each month. You’ll also get a “new” car out of the deal.

You can see, by the way, that if this is the route you choose to take, you’ll want to act quickly. You’ll want to do it before missed payments hit your credit report.

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Sell Your Car

If you can’t find a way to keep it, consider selling your vehicle to pay off the loan. Private sales often allow owners to realize some significant returns.

Selling your vehicle and paying off the remainder of your loan could still allow you to keep enough of the proceeds to fund the purchase of another vehicle. Remember, you’re having trouble making payments so be sure you get a sensible, reliable vehicle.

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Voluntary Repossession

If you truly can’t make payments and can’t sell your vehicle, it may be in your best interest to turn over the keys to your car.

Work with your lender to voluntarily turn in your car. They are still legally able to pursue you for any balance left on the loan, less the value of the car.

Often, if there is a small balance, they’ll forgive it since your voluntary repossession saves them a lot of time and money trying to track down you and your vehicle to retrieve it.

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File for Bankruptcy

If you’re having a more systemic problem with your finances, meaning that your car payments aren’t the only ones you can’t make, consider filing for bankruptcy.

Doing so will be a huge ding on your credit (you’ll probably a be a candidate for credit repair services in the future) and will affect your finances a great deal in the long term. However, many states have bankruptcy protections that allow you to keep your vehicle.

The overarching theme on what to do if you are unable to afford your car payment is to call your lender. They want to work with you to help you pay because they will make more money doing so.

They’ll definitely lose money if they have to pursue you to repossess the vehicle or have you enter bankruptcy. If you pursue one of the other options, be sure you do your research before moving forward.

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Credit Cards: Checking if You’re Pre-Qualified or Pre-Approved

Pre-qualification for a credit card can be, more than anything, a very good feeling. In many cases, it means that a credit card company or bank believes your credit history is good enough that they’re willing to give you a line of credit without pulling your full credit report.

But how do you know if you are pre-qualified? If you’re of the younger generation and generally toss all your paper mail in the trash can, you may have no way of knowing.

Pre-qualification is a great feature that credit card companies offer. That’s because it allows you to gather a number of different rates. You can also compare various accounts and card features to others.

Let’s take a look at what pre-approval or pre-qualification actually is. We’ll also look at how it works. We’ll also tell you how you can tell if you’re already in line for a shiny new credit card.

What are Pre-qualifications & Pre-approvals?

Simply put, pre-qualifications and pre-approvals are a way for financial institutions to perform a soft pull on your credit to determine if you may qualify for their credit products.

They do this by taking the last four digits of your social security number, combined with your name, to produce a small snapshot of your payment history and outstanding debts. They do not necessarily need your permission to do this because they’re not affecting your credit at all. Although, you could choose to opt out of future credit card offers from that company.

All in all, a pre-qualification is the financial institutions saying, ‘based on what we can see, we think we’ll approve you for our product.’

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So this means I’ll be approved, right?

Not necessarily. Remember that the pre-qualification process is a quick way for a financial institution to determine if you might be eligible for their credit products.

If you want to determine if you will be approved or not, you have to formally apply for the product. You will have to fill out a credit application and the financial institution will pull your credit, affecting your score appropriately.

It’s important to know that being pre-qualified or pre-approved for a credit product definitely increases the chance that they’ll approve you. After all, financial institutions aren’t in the business of sending offers to people who they know can’t use their products effectively.

However, you do have to complete the full credit application process to actually be approved.

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Pre-qualification or Pre-approval: Which is it?

In many cases in finance and credit, people often use the two terms interchangeably and incorrectly. However, they actually mean two different things.

In this case, however, they are actually interchangeable. Different financial institutions will define pre-qualification and pre-approval slightly differently.

In some cases, a pre-qualification is a screening offer and a pre-approval is a bit more final. But the long and short of it is, both are acceptable terms for the same thing.

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So how do I know if I am Pre-approved?

Pre-qualifications and pre-approvals come in many forms. There are a few things you can do to determine if a company has pre-approved you.

Check your Mail

Financial institutions will send both paper snail mail and email pre-approval offers. Do use caution whenever you’re considering an offer of credit received this way.

If you’ve never heard of the bank or financial institution, you should do a Google search. Also, be sure that you understand the terms and conditions of any offer.

Go Online

There are several websites that will check your pre-qualification status across various financial institutions all at once. Again, be sure to shop around. Certain websites partner with different companies so the card that’s right for you may not appear.

Contact the Source

Don’t be afraid to ask the financial institution directly if they’ve pre-approved you. They’ll be happy to let you know and most have a dedicated website where you can check your status.

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Tips before you check

First, make sure you have decent credit. If you do not have a fairly good credit score, it’s unlikely that a financial institution will pre-approve you for a credit card. If you still want one, there are a variety of options for consumers with damaged credit, including the possibility of repairing your credit prior to applying.

Second and related to the above, ensure you have the credit score you require for the card you’re looking to get. Financial institutions often have fairly strict requirements for various cards. If you’ll only qualify for a product that you don’t want, there’s no use in checking.

Finally and most importantly, ensure that the financial institution delivering the pre-qualified offer performs a soft pull of your credit. The whole process is moot if they’re logging inquiries on your credit report.

As always, do your research. Consider any pre-approval offers you receive as a starting point.

Don’t be afraid to use the pre-approval offer you received from one bank “against” another. You may be able to get qualified for a card that you want in this fashion.

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Leasing vs Buying a Car: Pros & Cons

Getting a car can be a big decision. Even as public transportation becomes more ubiquitous, getting your first car is still a rite of passage in America.

Whether you’re looking to get your first set of wheels or your tenth, actually getting the car can be challenging and confusing. You’ve got a multitude of different brands to choose from and each brand has a number of different models.

Moreover, those models have trim levels and different features. But maybe you know what you want. Even if you do, paying for a car can be equally as confusing. Financing, APR, insurance, wheel and tire; there are a variety of different things to think about when buying or leasing a car.

One of the more important and impactful decisions you’ll make is whether to buy a vehicle outright or if you’ll lease. There are lots of great reasons to do both and some important considerations as well.

Let’s take a look at some of the pros and cons of both buying a vehicle and leasing one.

Questions to Think About

Before we get into straight pros and cons, it is helpful to think about a few things that can help you make a decision to buy or lease.

What are you going to use the car for?

Typically, we purchase or lease cars for a practical purpose. You’ve got to get to work, pick up groceries, run errands and drop the kids off at practices.

Understanding how you’ll use your car will help ensure you get the right vehicle for you and your lifestyle. Getting a sports car and hoping to fit your four kids isn’t going to work.

More importantly, understanding what you’ll use the car for will also help you decide if you should lease or buy. If you’re driving long distances fairly frequently, a lease may not be for you.

Leases come with very strict mileage requirements. Alternatively, if you’re just driving around your town and really need low payments from month to month, leasing is a good option.

What’s your budget?

Once you understand what you’ll use the car for, take a hard look at your budget. Realistically, how much can you commit to paying each month?

In both purchases and leases, you should be prepared for an extended financial commitment. The difference is the amount.

Leases tend to cost less each month, but may require a down payment for the car that could be larger than what you’d put down if you purchased. Buying a car will lower that monthly payment but you’ll have to pay the whole amount you’re contracted for.

Lease or Buy – Pros and Cons

Payments

Monthly payments for leasing tend to be lower than purchasing a vehicle and you may not have to send in a large down payment. Those payments, however, don’t necessarily go anywhere.

You can think about leasing a vehicle as being like an extended rental. You’re paying to use the car, then you return it.

Warranty & Maintenance

With a lease, you’ll likely turn in your car before the warranty runs out, meaning that the cost of ownership is way down. You’ll still be responsible for regular maintenance like oil changes and tire rotation.

However, you’ll be able to avoid very costly repairs and if something does happen, dealers often offer great deals to their lessees. The con is the same as above – you’re not paying into anything.

Latest Tech

Leasing means you’ll be getting the most up-to-date car you can and can get a new one sooner. If you’re someone that absolutely needs to have the newest thing or if you just plain like having a new car, leasing is the way to go.

Ownership

Possibly the biggest con of leasing is that you don’t own a leased car. Leasing is essentially an extended rental. This means that you do not have an asset to consider, just liability.

Mileage

Purchasing a car allows you to drive as far as you want. But leasing has very strict limits. If you go over the mileage limit and decide to turn in the lease as opposed to purchase the vehicle, you could be on the hook for thousands of dollars in fees.

Value

Buying a car provides at least some cash value for your next car. Leasing does not. This isn’t as large a factor if you know that you can afford whatever vehicle you’ve selected. Still, there is something to be said for having a possession.

Upfront Costs

You’ll often have to pay a much larger upfront cost when purchasing a car as opposed to leasing one. To account for this, leasing has strict requirements, as we’ve spoken about.

Used Cars

If you’re looking for a used vehicle, you’ll almost never find a lease, and if you do, it will be massively expensive. If you want a used vehicle, you’re looking into buying it.

Insurance Premiums and Drivers

Both purchased and leased vehicles will have an effect on your insurance rates. Leased vehicles, however, will likely increase what you’ll pay. Additionally, certain drivers (like those under 21) may not be permitted to drive leased vehicles.

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So Which is Better – Buying or Leasing?

It very much depends on your specific situation. If you have a decent credit score, need a lower payment and want to get a new vehicle every two years or so, then leasing is right for you.

If you are looking to own a vehicle and want to retain some value, while avoiding turn-in fees, buy. Make sure that you take a robust and critical view of your finances before you agree to buy or lease a vehicle and sign on the dotted line.

Most importantly, car dealerships may not help you get what’s right for your financial situation. You need to come armed with your own information, know what you’re using the car for and how much you should expect to pay.

A variety of different resources allow you to see the average of what people are paying around you. Without doing your research, you’re more likely to pay more, whether you purchase or lease.

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How to Get Out of Debt Quickly

If you’re in debt, you’re looking for ways to get out of it as quickly as possible. Sure, winning the lottery is one way, as is stumbling upon a duffel bag full of cash.

However, it’s simply not all that likely that either of those very fortunate events will come to pass. So, if you can’t expect a sudden infusion of cash to pay your debts, what can you look forward to? What are some things you can do to get out of debt as quickly as possible?

Let’s take a look at a few of the things you need to do to get out of debt as quickly as you can, and hopefully, avoid some of the unpleasantness of constantly being behind the financial 8-ball.

Take Stock

How often do you find yourself just paying your bills without really understanding what’s in them? It makes sense. Paying bills is a boring and uncomfortable process, especially if you don’t have the money to cover them all. You don’t want to take any more time than you have to.

But facts are facts: you can continue to ignore the problem and never get around to fixing it or you can face it head-on and start solving it.

That’s what taking stock means. You’ve got to understand what you’ve got and what you owe before you can start climbing your way out of debt.

So, how do we do this? First, take a look at your pay stubs and calculate what your take-home pay is every month. This is the amount of money that ends up hitting your bank account.

Then, take a look at your bank accounts and credit cards. How much is going out every month? You want to identify a few things:

  • Necessities: these are things like rent, car payments, insurance premiums and utility bills
  • Near-necessities: Here, we’re talking about gas, food, and maybe your internet package. These are things you can’t really do without, but you may be able to find something cheaper.
  • Savings: Obvious – how much are you socking away?
  • Disposable: These are all the extra charges. Going out to eat, seeing a movie, or having people come to your place.

Look through your accounts and see if you can catalog each of the charges you’ve made recently. This will help you see where your money goes.

Take a very close look at how you spend money and where it goes. You’ll need to get your hands on as much money as possible to pay off your debt as quickly as you can.

Having trouble tracking your spending? Consider using cash. Take out a certain amount of money for a specified time period, say $200 for a week. Once it’s gone, its gone.

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Choose your Repayment Method

There are two tried-and-true methods to help you pay down your debt as quickly as possible.

First, we have the snowball method. You’ve probably seen the method around and it’s very popular. In essence, you need to make a list of all the outstanding debts you have.

Then, pick the lowest balance and work to pay that off, making the minimum payments on the other debts. When that’s done, roll that new money into the next lowest balance and so on.

The big reason to use the snowball method is because it motivates you to continue to pay your debt. There is a nice psychological effect when you repay a whole account.

The second method is called the avalanche. The avalanche method says you should make minimum payments on all of your debts, but pay off the balance with the highest interest rate first.

The idea here is to save you the most amount of interest possible. The avalanche method can also save you some time on repayment.

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Increase your Income

Easier said than done, perhaps, but increasing your income can help you pay down those past due balances much faster. You could take on a second job, but that can be difficult if you’re already working a lot or have a family.

You may have to get a little creative to make this work. Think about the things you like to do. Can you write or are you good at building things?

Maybe you like to do some graphic design in your spare time? All skills are marketable and the internet has made earning a bit of extra money on the side easier than ever.

There are a plethora of websites out there that will connect you with people looking for work they need done. Just make sure you throw some of your earnings in a savings account for taxes!

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Use your Rewards

Every little bit helps, including using your credit card rewards. If you’re in debt because of excessive use of credit cards, you likely have a solid stock of points banked.

Instead of purchasing that awesome new widget you’ve always wanted, consider using the points for charges you’ve made. You could also simply get a gift card to a grocery store or other boring location that will help you reduce the amount of money you spend each month.

Take that money and throw it at your debt. Make sure you shop around, as well. Different credit card companies usually have deals with a variety of retailers. Make sure you get the best bang for your reward points.

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Talk to your Creditors

If you’re truly having a tough time paying your bills and simply need a bit of breathing room, don’t be afraid to contact your creditors. They have a vested interest in your successful repayment, so they will likely be very happy to help you out.

Your creditors will likely offer you payment assistance or interest rate adjustments. This may not necessarily help you pay off your debt quicker, but it can be the only option if you’re having to select between successful repayment and bankruptcy.

Repaying your loans come down to understanding how much you bring in and what you’re paying. Once you understand that, come up with a repayment strategy, like the snowball or avalanche method, and get it going. If you can stick to your plans, you’ll be out of debt before you know it!

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What is a Fraud Alert?

A fraud alert is exceptionally helpful if you believe you’ve been the victim of identity theft. Understanding what a fraud alert is — and more importantly, is not — can help you determine if it’s right for you and if it’s a step you should take to safeguard your financial health.

There are a few types of different fraud alerts available to consumers, so let’s walk through a few of the options, explain each, and then make sure you understand what fraud alerts do not do.

What is a Fraud Alert?

You’re browsing through your credit report because you’re a responsible credit user when suddenly you notice a strange balance on your John Doe Bank credit card. You know you haven’t used it in a while so there shouldn’t be a balance at all. You open up your online credit card account and notice that there are several charges to a big box electronics store in Wisconsin.

As you live in Delaware, you’ve never been to Wisconsin. You pull out your wallet and notice your card is missing.

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What do you do?

Well a whole lot of things, but for the purposes of this article, you call up the credit reporting agencies! A fraud alert is a note on your credit report that tells the credit reporting agencies and any legitimate lenders you may be working with that you may be the victim of identity theft. Lenders are then supposed to require more identification from you in order to approve or continue a line of credit in your name.

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The Different Types of Fraud Alerts

All credit bureaus offer two types of fraud alerts.

An initial fraud alert is what you’ll be calling for if you discover that your identity has been stolen or if you believe it has been. These expire after 90 days and the companies will automatically remove them.

You are able to request an extension if you believe it is necessary. This fraud alert simply alerts lenders that they should seek additional information from you as you apply for credit.

An extended fraud alert requires much more work and is incredibly useful if your identity has actually been stolen. These alerts last for seven years and credit bureaus must confirm with you directly when a company notifies them that you are applying for credit.

In order to set up an extended fraud alert, you are generally required to obtain a report from the Federal Trade Commission proving that you have had your identity stolen. Additionally, the credit bureaus may require a local police report, as well.

NOTE: These fraud alerts are not the same as security or fraud alerts offered through your credit card company. While these are useful, credit bureau-based fraud alerts are much more serious and can affect how you use your credit.

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What Fraud Alerts Don’t Do

  • Companies use fraud alerts after your identity has likely been stolen. It is your responsibility to safeguard your information by using appropriate computer networks, safeguarding your personal belongings and only dealing with legitimate merchants.
  • Fraud alerts won’t repair the damage caused by identity theft.
  • They are not the same thing as credit card fraud and usage alerts, which are also very useful.
  • Fraud alerts do not freeze or pause your credit entirely — you can do this as well, if you believe it necessary.

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How do I set up a fraud alert?

First, carefully review your credit report. If you have been the victim of identity theft, take the appropriate action with law enforcement. Next, contact each credit bureau in turn. Request the action that best meets your needs, either initial or extended fraud alerts.

Equifax: 1-888-836-6351
Experian: 1-888-397-3742
TransUnion: 1-800-680-7289

Fraud alerts can help you get back on your feet after an identity theft tragedy. Be sure to do your research and safeguard your personal details whenever you are using your credit.

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Avoiding Foreclosure Relief Scams

All eyes are on the Federal Reserve, as they continue what looks to be an ongoing round of interest rate hikes in 2018. This has already led to an increase in mortgage rates.

For homeowners who are have fallen behind on their mortgages, this is not good news. For those who are facing foreclosure, the thought that their mortgage payments may increase due to a rate hike could be even more worrisome.

The thought of losing your home is likely one of the most frightening you’ll ever have in your lifetime.

Feelings of failure for not being able to hold onto your piece of the American dream can be aggravated by the worries over what you can do to avoid losing your home.

During such a troublesome time, you’re more vulnerable to just about anything that promises to help you get out of your rut. This includes offers from companies that say to you that they can help you keep your home.

Unfortunately, too many of these offers are simply foreclosure relief scams. They prey on people who are in horrible financial predicaments that have left them in the position of being about to lose their homes.

In this post, we’ll outline the most common scams that homeowners face when they are on the brink of losing their homes. We’ll also provide tips to help homeowners avoid foreclosure relief scams.

Key step to avoiding nightmare foreclosure scams

Our first stop in finding out about foreclosure relief scams was the Department of Housing and Urban Development’s website. This should be your first stop, too.

The site provides a bounty of information that includes ways homeowners can empower themselves with knowledge to shield themselves from scammers.

HUD stresses that being able to immediately spot a scam is key to avoid being a victim of it.

Questions to ask yourself when you are suspicious of a foreclosure relief offer include:

  • Did anyone offer to help modify my mortgage, either directly or through advertising such as a flyer?
  • Did the offer entail a guaranteed loan modification?

These are just a few of the telltale signs noted by HUD that a scammer is about to run their game on you. Keep reading to learn how you avoid being their prey.

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Pay us, and we’ll take over from here

Some schemes are so outrageous that they become head-scratchers. This is especially the case with ruses in which the people pitching the fraud are able to convince homeowners to make their mortgage payment to them, instead of to the lender.

The fraudster may tell the homeowner that they will handle all the financial matters related to the delinquent loan, including mortgage payments.

Part of this may entail the fraudster giving the homeowner a new address to send their payments.

Credit.org warns homeowners to be skeptical of anyone representing themselves as a “foreclosure prevention expert” who asks to change the mortgage’s payment address.

Instead, homeowners approached with this type of scheme should contact their mortgage company themselves to verify where the payments should be sent.

Furthermore, never stop making your mortgage payments to your lender in lieu of paying some other company. This is a recipe for a disaster.

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Sign on the dotted line

Be extremely leery of anyone who says they can lower your monthly mortgage payment while also guaranteeing they can help you own your home free and clear of any debt.

These fraudulent offers come with a disturbing caveat. You will likely be duped into entering an agreement. That will lead to you signing over the deed to your home.

Unsuspecting homeowners are sometimes told by the scammer that that the deed must be turned over, but the transfer is just temporary.

Once the homeowner has signed on the dotted line, they’ve pretty much relinquished their home to the fraudster.

Best advice here is to not sign anything, unless you have had it independently reviewed by an attorney.

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“I’m with your lender, and I’m here to help”

This is the standard line from scammers who prey on homeowners who are at their wit’s end.

Often these people don’t even know who your lender is, let alone be in a position to help you avoid a foreclosure.

These people are notorious for asking for personal financial information. That includes your banking account numbers, to get the process started. They particularly go after homeowners with offers to help them take advantage of loan modification programs.

Avoiding this scam is simple. Never give out personal financial information to anyone who calls. And don’t pay a fee for housing counseling.

These scammers will also pretend to be with a government-approved agency. You can check them out with a Google search, or through HUD.

Keep in mind that there are several agencies staffed with trained counselors who may be able to help you avoid foreclosure – for free.

If you are approached with this type of offer, walk away. Also, get as much information as you can about that person and their company so you can report them.

At the end of this piece, you’ll find links to the agencies that handle mortgage foreclosure scams.

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Just call your lender

Being in foreclosure can cause you to lose hope that there is any chance that you can save your home. Not so fast with that negativity.

A call to your lender to explain your situation may be the most important step you can take to avoid foreclosure.

Lenders have the ability to restructure loans. For example, they can place the delinquent payment(s) at the end of the loan. They can also work out other payment arrangements.

The key here is to stay in touch with your lender. They don’t want the expense of foreclosing on your property any more than you want to lose it.

Be proactive by reaching out to your lender as soon as you see financial woes affecting your ability to pay your mortgage.

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Verify & seek help by using these resources

Visit the U.S. Housing and Urban Development Agency’s website for information about its efforts to stop scams.

The Office of the Comptroller of Currency offers information on foreclosure relief scams on its website.

You can report mortgage fraud to the Inspector General for HUD by sending an email to hotline@hudoig.gov

If you need help repairing your credit, find the best companies to work with here.

If you need a housing counselor, visit HUD by clicking here.

Avoiding Loan Modification Scams

Following the 2008 housing collapse, thousands of homeowners found themselves with mortgages they could no longer afford.

Many tried to stave off the inevitable foreclosure through loan modifications. Then they found out their desperation had led to them to fall hook, line, and sinker into a scam.

The housing market has since improved since those dreadful years following the collapse. However, there are homeowners who are still finding it difficult to pay their mortgages.

Therefore, scammers still have a breeding ground to use their unsavory practices. They take advantage of some of the most vulnerable people trying to keep their homes.

Here we’ll examine the loan modification scams that seem to be the most tempting, snagging homeowners time and time again.

We’ll also give tips that homeowners should use as their guide to avoid these scams in the first place.

Has a loan modification scam or other bad credit situation negatively affected your credit report? PreventLoanScams.org’s research of the 5 best credit repair companies can help.
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What’s loan modification, anyway?

Before we go into the loan modification scams that plague homeowners, or the tips to avoid them, let’s first go over what exactly loan modification is.

Homeowners who fall behind on their mortgages have several options to avoid losing their homes. One of those options is loan modification.

A loan modification plan permanently restructures a mortgage by changing its terms. Those terms include a reduction of the interest rate and/or monthly payment.

Loan modifications can also entail conversion of the interest rate to one that is more financially feasible for the homeowner. For example, the modification might convert the rate from fixed to variable.

Some modification plans may also extend the length of the term of the loan.

Homeowners should be clear on whether or not they qualify for loan modifications. Seeking the help of a counselor is the first step.

Eligibility requirements include showing proving financial hardship. Homeowners may have to provide their lender with documentation of that hardship.

For example, if the hardship is the result of a job loss, the homeowner may have to furnish the severance letter. They may also require proof of income, recent tax returns and bank statements.

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They want a fee? Run.

Now that you understand what loan modifications are, let’s look at some of the most common scams run by these low-lifes.

Perhaps the most prevalent scam entails a so-called agency. It promises to help the homeowner obtain a loan modification for an upfront fee. This, in itself, is ridiculous, because homeowners can receive such counseling for free by simply contacting the U.S. Department of Housing and Urban Development.

So, homeowners who encounter people who say they can help them, as long as they pay, should run for the hills. These people are notorious for taking your money and then running off.

Red flags about these scammers include them insisting the homeowner not contact anyone about the agreement they are trying to reach with the homeowner. Also, these scammers can be so egregious as to ask the homeowner to pay whatever mortgage payment they can muster up directly to them instead of to the lender.

Ding, ding, ding, ding, ding. Homeowners in debt to their lender should pay the lender, not some stranger.

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Useless, fancy titles

Then there are so-called forensic loan auditors mortgage loan auditors, or foreclosure prevention auditors. They say they are supported by forensic attorneys.

That’s so professional-sounding, it’s no wonder they are often able to dupe even the most astute homeowner.

Regardless, they are as crooked as they come. They may offer to review a homeowner’s mortgage loan documents. They claim this determines whether their lender complied with state and federal mortgage lending laws.

The Federal Trade Commission explains that these “auditors” may tell the homeowner that they can use the audit report to avoid foreclosure, accelerate the loan modification process, reduce loan principal, or even cancel the loan.

The best way to spot and avoid these fraudsters is to understand their false narrative.

First, homeowners should know that there is no evidence that forensic loan audits will help them get a loan modification. This is even if they’re conducted by a licensed, legitimate, and trained auditor, mortgage professional or lawyer, according to the FTC.

These so-called forensic auditors are known to tell homeowners that they can sue their lender based on errors in their loan documents. Then they’ll tell the homeowner that if they win, the lender must modify the loan to make the payments more affordable.

That is not true, warns the FTC. There is no such requirement.

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“Well, they kinda sound like a legitimate agency”

“Hi, I’m with the Federal Homeowners Assistance Bureau and I was told by your lender to contact you regarding your delinquent mortgage.”

Well, that sounds official, right? This is where Google could be a homeowner’s best friend.

Scammers are becoming very savvy in seeking out their victims and using official-sounding names like the one used in the quote above. Some are even becoming bold enough to use federal emblems or logos on fake websites they build to reel in unsuspecting homeowners.

Homeowners can quickly learn the legitimacy of a company by doing a quick internet search, and/or by contacting their lenders.

The Office of the Comptroller of Currency (OCC) points out that these scam artists may use such terms as “federal,” “TARP,” or other words or acronyms related to official U.S. government programs.

The agency goes on to note that “these tactics are designed to fool homeowners into thinking the scam artist is somehow approved by, or affiliated with, the government.”

Homeowners can avoid the fraudsters who claim to be offering plans that are “government-approved” or “official government” by contacting their lenders. Again, lenders are readied to inform homeowners on whether, or not, they qualify for any government initiatives to prevent foreclosure.

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In Conclusion

Losing a home due to foreclosure can be one of the most devastating events to impact a homeowner. In desperation, homeowners may seek out or go for whatever offer they can to save their homes.

Unfortunately, scammers are waiting in the wings to swoop in with some offer that homeowners may be more than tempted to accept. The loan modification offer is one of the offers that scammers notoriously use to prey on unsuspecting homeowners.

Falling for one of these scam artists can make their financial situations even worse, potentially leading to the need for credit repair by a company like Lexington Law.

Legitimate loan modifications can happen for eligible homeowners, but they often come with wording like this:

  • “To get everything started, we just require a small, upfront fee.”
  • “Our loan modification program is approved by HUD.”
  • “Sign over your deed to our company and we’ll begin the process.”
  • “Don’t pay your lender directly anymore; just pay us and we’ll handle it for you.”
  • “We provide a 100% guarantee that you will get that loan modification.”

Homeowners facing foreclosure should keep in mind the old adage of “if it sounds too good to be true, it is.”

Financial Scam Victims

It is estimated that more than 25 million people find themselves as victims of fraud each year. This includes everyone from the elderly, to well-educated young adults.

The Federal Trade Commission found that the most-reported frauds involved weight loss products, prize promotions, unauthorized billing for buyer’s clubs or internet services, and work at home programs.

The reason scammers are so successful is not due solely to the naivety of the person targeted. It has to do more with scammers being so good at manipulating their prey.

The root of many scams is making or saving money. Scammers have a frighteningly keen awareness of this.

The best of them structure their schemes knowing that there is wide swath of consumers who are willing to risk their hard earned dollars, no matter how far-fetched the scheme seems.

In this post, we’ll examine some of the factors that allow scammers to succeed in duping the unsuspecting. Because people are prone to falling victim to scams when they want to save or make money, we’ll also give you some of the tactics that you should consider to be red flags when spotting scams.

Our goal in this post is to bring you key information for avoiding scams by recognizing them immediately. Furthermore, we’ll highlight for you the many red flags that you should understand in knowing when you’re about to be, or have been, a victim of a scam.

Preying on consumer desperation

Scammers are opportunists who often look to societal happenings as ways to line their personal financial coffers.

As noted above, there are some scams that are so prevalent that they have earned a place on several consumer watchdog and government lists. The tried and proven nature of these scams make them go-to practices for fraudsters.

Following the 2008 housing collapse, fraudsters saw that the level of foreclosures would rise. Fraudsters realized this was an excellent opportunity to swoop in on desperate homeowners with promises of helping them to save their homes.

Their scams have included requesting fees in advance with the promise to the homeowner that they would stop the foreclosure. In these cases, most of the homeowners never saw their money again, nor did they ever hear from the fraudster again.

Also, be aware that you are likely being duped in an advanced fee scheme if it has anything to do with Nigeria. So dubious and prolific in their nature, these schemes have made myriad warnings lists.

As explained by the U.S. Securities and Exchange Commission, in these schemes, someone pretends to be a Nigerian official or business-person. Know you could be, or you’re being, victimized if the person asks you to help them move money out of Nigeria in exchange for “high, hassle-free profits.”

Tell-tale signs of this scam include unsolicited mailings, faxes, phone calls, and e-mails.

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Pay now and then we’ll get started

Advance payment schemes made the FBI’s “most common types of scams” list.

The FBI points out that these agreements can actually turnout to be legal if the so-called finder proves that they never intended to, or was able to, provide any financing.

That’s frightening. The scammer schemed to dupe someone out of their money. They also likely covered their bases with another way to evade the authorities.

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Don’t let financial jams make you vulnerable to scammers

When it comes to offers to help you get out of financial jams, there are red flags to be aware of.

Did someone ask you to sign a contract that entails a so-called “finder’s” fee? If so, they may be scamming you. Too often victims learn that they are ineligible for financing only after they have paid the “finder” according to the contract.

Also, know that a scheme is in the works if the offer entails nondisclosure or non-circumvention agreements.

The FBI notes that scammers design these types of agreements for a reason. They do so to prevent you from independently verifying the bona-fides of the people with whom you’ll be doing business.

Con artists often use non-circumvention agreements. They threaten their victims with civil suits if they report their losses to law enforcement, according to the FBI.

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That gut feeling

Perhaps the best type of scam detector is your gut. It’s that feeling you get when something just isn’t right.

That feeling, along with the offer being “just too good to be true,” can help you to avoid being scammed.

The website Scam Guard gives examples of these types of offers, including:

“Money left to you from an unknown relative; being awarded a loan or grant you haven’t applied for; winning a lottery you’ve never entered; and being selected to receive a share in funds in return for using your bank account.”

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Do this or else you’ll miss a great opportunity

Scammers will often place pressure on their prey to agree to their offer immediately, or it will pass you by. This often works as they know that few want to pass up a great opportunity when it comes to money.

The pressure tactic is largely seen in get rich quick schemes, such as investing. The fraudster will guarantee a certain return percentage, which is usually astronomical. Don’t let greed lead you to fall for a scam that will cost you money instead of earning you money.

If the person offering you the deal is eager that you comply immediately, without allowing you time to do your own due diligence, walk away.

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In conclusion

We took a look at the FBI’s website on scams and we found this statement to be spot on.

“The variety of advance fee schemes is limited only by the imagination of the con artists who offer them.”

At the end of the day, there is rarely a perfect solution to a financial problem. If your credit is in a rut, and you’re looking for a company to help, make sure you’re working with one of the best credit repair companies for your situation.

If you’re low on funds, stay on-guard and shield yourselves from potential online (or offline) scams. On that same note, there is rarely a perfect way to become rich with little effort unless there’s some kind of illegal activity going on.

Check the legitimacy of the person/company making the offer through a search on the internet. Add “scam” to the end of the name, and see what comes up. If there are plenty of results, ignore the offer.

Go to websites like those of the FBI and FTC that have a wealth of information on the latest scams making the rounds. They also provide ways to report them if you have been a victim.

And as with all offers, keep in mind the rule of thumb that says:

“If it is too good to be true, it probably is.”

Avoiding Refinancing Scams

Due to recent events, it’s becoming more and more important to arm yourself with tips and techniques to avoid refinancing scams.

The 2008 housing collapse will go down as one of the worst financial debacles in history.

From the disaster came a slew of financial woes for homeowners, including the loss of value in their homes.

Many found themselves with mortgages that were underwater. Being underwater means you owe more on your mortgage than your home is worth.

Those who find themselves with underwater mortgages see refinancing their mortgages (and loan modification) as the best options to be able to afford and not lose their homes. This was especially the case following the housing collapse and the subsequent Great Recession.

The financial crisis affected the ability of millions to be able to afford their homes. They turned to refinancing to save their homes.

Fraudsters saw these homeowners as golden opportunities, and set out to prey on them with carefully crafted refinancing scams. Although the housing market has improved since 2008, the predators have not slowed their efforts to scam unsuspecting homeowners with refinancing scams.

In this piece, we’ll go over how refinancing helps homeowners. We’ll also give you tips on how to avoid refinancing scams.

Scammers wipe out your equity

Refinancing can provide homeowners with considerable financial relief. This includes restructuring the existing loan with a lower interest rate and term.

Some may refinance by taking out a new mortgage for more than they owe. They can use the difference to pay for college for their kids, or pay off outstanding debts.

Then there are those who refinance for a more attractive interest rate.

People who have variable-rate mortgages tend to seek fixed-rate mortgages when rates rise. This happens a lot with people who have adjustable-rate mortgages, commonly referred to as ARMs.

For these situations, there are scammers who have crafted a scheme to fit they pitch as being perfect to fit the homeowner’s need.

For example, for the homeowner looking to refinance so they can cover their child’s education, the “loan flipper” scammer may rear its head. They’ll contact homeowners randomly until they strike gold.

Their scheme entails offering to refinance the mortgage at lower rates to help the owner free up cash. After the first refinancing, they’ll offer up another one.

Unsuspecting homeowners end up incurring closing costs and other fees with each refinancing. Keep in mind that the scammer’s fees will likely be sky high.

The refinance drains the equity from the home, and the scammer walks away with cold cash from their excessive fees.

In a nutshell, avoid doing refinancing transactions by simply contacting your lender, or bank, for a deal. Also, you may find community banks to be a great resource.

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Fraudsters ride coattails of refinancing programs

The Home Affordable Refinance Program, or HARP, was introduced in 2009, and was aimed at helping borrowers with little or no equity, refinance into more affordable mortgages.

Since its introduction, the main enhancement to the program entailed the removal of the limit on the amount that homeowners could be underwater. That enhancement allowed for more homeowners to qualify for the loan.

With that change, many homeowners who were not eligible (potentially due to credit repair issues) will now qualify. That widened the preying field for scammers.

These people made for the perfect targets for scammers. Knowing their desperation, scammers would make offers that entailed ways to get around HARP’s stipulations.

HARP makes for a classic example of how doing your homework is key to being a homeowner.

HARP’s provisions include assistance for homeowners whose home values have decreased. It has many eligibility requirements, however.

Those requirements include the homeowner having a good payment history for at least the previous 12 months, with no late payments in the last six months.

Furthermore, homeowners with more than one 30-day late payment from six to 12 months ago, are not eligible.

Also, your loan must have closed on, or before, May 31, 2009. The last date to get a HARP refinance was December 31, 2018.

Arming yourself with information so you can recognize scams can keep your money out of the hands of scammers. In the case of HARP, homeowners who research the program are more likely to detect, and avoid scammers.

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Bait-and-switch scams

Some have fancied bait-and-switch scams as being the oldest trick in the book.

Scammers have taken the schemes to a whole new level by masking themselves as scrupulous lenders.

Potential victims are baited with some too-good-to-be-true offers, such as an enticing interest rate and/or lower monthly payments.

The person making the offer seems to work tirelessly on structuring the loan, but at the last minute, chaos begins. The person surprises the homeowner with a new loan structure, complete with more expensive fees and costs.

Surprisingly, many people fall for the more expensive loan, found U.S. News & World Report. It did a story on the bait-and-switch scam.

In that story, the news organization noted that homeowners move forward with the amended offer because “they feel they’re already too invested in the loan to back out.”

Also, they may be fearful they won’t be able to find financing for their dream home elsewhere. Meanwhile, the lender reaps a generous profit without having to do anything outright illegal, U.S. News found.

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From the horse’s mouth

We’re not talking about the scammers, here. We’re referring to the government agencies that field the thousands of complaints from homeowners who have been scammed.

This includes HUD and the U.S. Department of the Treasury.

Here are some of their tips to avoid refinancing scams:

  • Beware of individuals or companies that offer money-back guarantees.
  • Beware of anyone seeking to charge you in advance for mortgage modification services. In most cases, charging fees in advance of a mortgage modification is illegal.
  • Only your mortgage company has the discretion to grant a loan modification that could include a refinancing. Therefore, no third party can guarantee or pre-approve a Home Affordable Modification Program modification application.

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Still want to go with a third party?

If that third party refinancing offer seems too good to turn down, seek out a housing counselor to review it. Government-approved housing counselors generally will advise you for free.

For more information, visit the website for the Official Guide to Government Information and Services.

Avoiding Legal Representation Scams

What do Steven Spielberg, Kevin Bacon and Larry King have in common? Along with their celebrity status, they have all been scammed by a man who controlled the largest Ponzi scheme in U.S. history: Bernie Madoff.

Anyone with money in their bank account or access to a credit card can fall victim to a scam. It doesn’t matter how intelligent you are, how much money you have or don’t have, or how many people you know.

There are certain factors that can make you more vulnerable to scam artists. Your age, where you live, and certain life events, like buying a house or car, may make you a target.

Even seeking a lawyer can leave you vulnerable. Looking for representation after being in an accident or help with staying in the country? You could fall victim to a scam.

It’s important to know what these types of scams look like. Keep reading to find out some simple rules to protect yourself.

What is a Legal Representation Scam?

A legal representation scam can take many forms. Generally people posing as lawyers will advertise services they are not qualified to offer.

Once an agreement is signed, the client will pay whatever the posing lawyer asks for to keep the legal process moving forward.

But after some time the client realizes nothing has happened with their case. Unfortunately,by this time they may be in trouble and it’s impossible to get their money back.

Some of the most common scams fall under a few categories:

  • Immigration
  • Accidents and Personal Injury
  • Disability / Insurance claims
  • Tax cases, or getting audited
  • Bankruptcy

Even though the specific details may differ, the basic structure of a scam is the same. Similarly, the same rules apply when it comes to avoiding a scam.

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Tip #1: Watch for Common Scam Signs

Knowing what common scams look like will go a long way towards protecting yourself. If you’re looking for help with a bankruptcy or personal injury, for example, be extra vigilant.

Know that there are some people out there who would pose as a lawyer or firm, but aren’t able, willing or qualified to actually help you.

Some common signs of a scam include:

  • Payment needs to happen quickly. You can’t ask questions or get clarification.
  • It’s an emergency. Someone may threaten you or your loved ones.
  • Requests for money usually happen over text, email or phone.
  • The person contacting you is not someone you recognize. They may be in a different region of the country.

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Tip #2: Trust Your Gut

Often being able to avoid a scam comes down to instinct. It might seem like a difficult tip to follow, but if anything seems “off” to you, trusting your gut starts with paying attention.

Signs can start showing up immediately. The contact’s email address, name, the subject line of the email, even the format of the email, are all signs that can point to a potential scam.

Another sign is a change in tone. Does the person contacting you sound different than anyone you’ve had contact with before? A common sign of a scam is the appearance of an emergency or aggressive tactics.

If the person contacting you doesn’t allow you time to figure out what’s going on, or gets frustrated with your questions, be cautious.

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Tip #3: Do Your Research

Sometimes you can find out about a potential scam by asking around. A member of your community or someone you work with may be familiar with the firm or lawyer you’re planning to work with, and can give you some advice.

Getting a referral by someone you trust helps, but the same goes for bad reviews.

A simple Google search could be all you need to discover a lawyer you found may be less-than-trustworthy. For example, if you get a call from someone claiming to be from a lawyer’s office, google the phone number and the person’s name (before giving them any information).

Local consumer affairs organizations will often post information about recent scams on their website. Some government authorities update this information regularly, so check with your local authority before signing any contracts.

The Federal Trade Commission has a list you can sign up for to receive updates.

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Tip #4: Stay Focused

Occasionally you may be approached by a company or person you didn’t anticipate, offering you services you were not looking for.

Keep your attention on the issue or problem you want resolved. Be wary of any offers that seem too good to be true, or that appear to come out of nowhere.

Earlier this year, for example, the FTC reported on “recovery scams.” Scam artists would approach individuals who had already been the target of a different scam. In these cases, artists promised that they would help the victim get their money back.

Paying attention is especially important if you’re being contacted by someone who is speaking quickly, giving you information that you don’t understand, or is unable to answer your questions clearly.

Don’t get wrapped up in whatever drama they are trying to create. Stay calm and centered. There’s no need to feel bad about hanging up or not responding.

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Tip #5: Be Stingy

One of the key signs of a scam is how a person approaches you. Usually the scammer will make immediate demands that you “have to” respond to now. The simplest way to evade this tactic is to hold on.

This advice applies to your money, and your personal information. Keep your information to yourself. This includes anything that identifies you or that people could use against you in the future, like old addresses, your signature, credit card numbers, places of employment, etc.

Being stingy with your money and information is about giving you some power. If you are being asked for money from someone you don’t completely trust, take your time to find out who they are and make sure you’re completely comfortable.

Usually a scammer will stop contacting and harassing you if they can tell you’re not easily convinced, or if you don’t give them what they want. But if they sense some hesitation or if you email them back, that could be an invitation for more emails and calls.

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In Conclusion

You’ve probably been the target of a scam and are right now on someone’s list for a phone call or email promising money or a quick resolution to a problem.

If you’re looking for legal representation, know that in your search for the right lawyer or representative you may come across people who are looking to help themselves, not you.

If you’re just not sure about someone contacting you for money, stay vigilant, focused, and knowledgeable about how scam artists work and your rights.

Keep an eye open and your fist closed. If all else fails, remember that you can do nothing: sometimes the best response is no response at all.

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