If you’re struggling to make your car payments, don’t let a loan modification scam set you back even further.

If you’re having trouble making your car payments, the possibility of having your car repossessed by your lender is a risk you might be desperate to avoid. Unfortunately, scam artists know this and may try to take advantage of you by claiming they can reduce your payments. Don’t fall for it. Let’s look at how auto loan modification scams work, red flags to watch out for, and ways to stay safe.

How Auto Loan Scammers Operate

The truth is that auto loan modifications can rarely be negotiated via a third party – and these scammers have no intention of trying.

Scammers will prey on your fear. They will promise to renegotiate the terms of your loan with your lender, so you can afford your car payments and keep your car. Unfortunately, they have no intention of contacting your lender. Their only goal is to get as much money from you as possible. To do this, they might:

• Charge you an upfront fee. They’ll charge you an upfront “enrollment” fee for this “service,” which might cost several hundred dollars.
• Demand further fees: They might also demand further fees for continuing to “work on your case.”
• Tell you to stop making payments – or make payments through In the meantime, they might tell you to stop making payments to your current lender or loan servicer – until they finish their “negotiations.” Or they might tell you to make payments through them – so they can pocket the money.

The truth is that auto loan modifications can rarely be negotiated via a third party – and these scammers have no intention of trying.

Watch Out for These Red Flags

Have you been contacted by a company offering to renegotiate your auto loan for you? Companies trying to scam you may:

• Make specific upfront promises. The supposed loan company makes specific, upfront promises about reducing your monthly payments or helping you to avoid repossession. No one can rightfully make these promises.
• Claim to work closely with lenders. They might claim they work closely with lenders and dealerships.
• Provide fake testimonials. Their ads or website might also feature testimonials from satisfied customers that are fake.
• Promise if they can’t make a deal for you, they’ll refund your money. These promises are meant to make their offers look legitimate. Unfortunately, paying a scammer is usually not reversable.
• Insist that you deal directly with them. Finally, they tell you to communicate only with them, not your lender. That’s a big red flag indicating the company is not legitimate.

If you take up a company’s offer to renegotiate or modify your auto loan, you’ll lose whatever fees you paid the phony loan modification service. And if your loan is already delinquent, you may fall even further behind on your actual payments – leaving you at a greater risk of repossession.

Unfortunately, many victims don’t find out about the scam until their vehicle is repossessed – and the scammers have taken their money and run.

In reality, legitimate loan modifications almost never cut your rate or principal. They may lower your monthly payments by extending the length of the loan term or defer car payments you missed until the end of the term. But they won’t decrease the total amount you’ll have to repay; in fact, loan modifications may increase it.

What to Do if Your Car Is Repossessed

When you default on your auto loan, the lender has the legal right to repossess your vehicle – and they generally don’t need to go to court or notify you before they do. The lender may keep your repossessed vehicle or sell it. At that point, they should let you know what they intend to do with the vehicle, as you may have an opportunity to buy it back at a public auction. The lender might even reinstate the loan, but that option comes with extra fees.

Ways You Can Stay Safe

Here are some ways you can protect yourself from auto loan modification scams and avoid having your car repossessed:

• Contact your lender immediately. First and foremost, if you’re struggling to make your car payments, contact your lender or loan servicer immediately. They may be able to help – if you act now.
• Don’t stop making payments. And no matter what – don’t stop making payments directly to your current lender or loan servicer.

What to Do if You’re a Victim

If you believe you’ve been targeted as part of an auto loan scam:

• Call your financial institution immediately if you’ve sent money or data.
• File a report with the Federal Trade Commission at ReportFraud.gov.
• And contact your state’s attorney general at org.

Don’t let scammers leave you stranded! Remember these tips so you’ll be able to spot a fake auto loan modification offer. To learn more about avoiding financial scam artists or for help with auto financing, talk to your financial institution today.