Old Ford Escort for a Ridiculous Price; What Was She Thinking?
Are we all smart enough to avoid predatory lending practices when financing a vehicle? Have there been times when emotions overcame practicality and sensibility? Most of us can point to a time when we bought something for a much higher price or with worse terms than we should have, but this one takes the cake.
How much is this woman paying for the old 1998 Ford Escort?
While there’s nothing wrong with an old Ford Escort, the deal one woman got was terrible. MSN reported a post that first appeared on Hip Hop Vibe of a woman buying a 1998 Ford Escort. While this part of the story is mundane, the rest is not.
The deal signed for this old car has her locked into paying $289 per month for the next 84 months. That’s right, a car that might be worth $1,500 at the most will cost her$24,276, and she will pay for it during the next seven years. This car is already 25 years old, which means it will be more than 30 years old when she’s done paying it off.
This terrible deal is just one example of the predatory auto loans running rampant in almost every city.
What is predatory lending?
This lending practice imposes unfair and abusive loan terms on borrowers. Investopedia tells us this could include:
- High-interest rates
- High fees
- Terms that strip the borrower of equity
Normally predatory lenders use aggressive sales tactics and deception to convince consumers to enter into loans they can’t afford. Often this is done by preying on the emotions of the consumer. Regarding the woman that chose the 1998 Ford Escort, she won’t have any equity when the loan ends if there was any equity in that car to start with.
Is predatory lending a crime?
While your purchase decision is entirely yours, lenders are responsible for ensuring your loan matches your risk profile. Predatory auto loans generally go against this. There are laws in place to protect consumers, but most consumers don’t know their rights. Because of this, many lenders continue to practice predatory lending.
How can you avoid becoming a victim of predatory auto loans?
Information is the best ammunition against predatory lending practices. You want to be financially literate enough to understand when a deal sounds too good to be true or when something doesn’t seem quite right.
It’s also a good idea to shop around for any loan before signing. You might find that various car dealers offer different rates and monthly payments for similar vehicles. Shopping around allows you to compare terms and find the best deal.
Why did the woman agree to the 1998 Ford Escort?
Logic tells us that she entered into a bad deal that could fall under predatory lending practices. Still, if she had no alternative but to agree to the terms of this old car, she was in a poor negotiating position. You can come to your own conclusions regarding why she bought this old car for the terms given.
Next, check out what yo-you financing is, or learn more about how to avoid predatory auto loans in the video below: