Key Insights
Why is Exeter Finance considered a predatory lender?
Exeter Finance targets high-risk borrowers with high-interest loans, often leading to unaffordable monthly payments. They offer loan extensions that misleadingly add significant interest charges without clear disclosure, trapping borrowers in debt.
How do loan extensions by Exeter Finance mislead borrowers?
Loan extensions from Exeter Finance move payments to the end of the loan, adding substantial interest charges that are not clearly disclosed. This results in borrowers owing thousands more than expected, often leading to repossession of their vehicles.
What is the role of CarMax in Exeter Finance's lending practices?
CarMax, the largest seller of used cars in the U.S., partners with Exeter Finance to provide loans to customers with lower credit scores. This direct connection places many CarMax buyers at risk of receiving high-interest Exeter loans.
What makes Exeter Finance's practices particularly harmful?
Exeter Finance's loans are more expensive than those of similar subprime lenders, and a majority of their loans are behind schedule. Their extension practices keep loans from defaulting but trap borrowers in unaffordable debt, often leading to repossession.
What is the main issue with the transparency of Exeter Finance's loan extensions?
Exeter Finance does not clearly disclose the total interest charges added by loan extensions, making it difficult for borrowers to understand the true cost of their loans. This lack of transparency leads to unexpected and unaffordable final payments.
What tool does ProPublica offer to help borrowers understand the impact of loan extensions?
ProPublica created a calculator tool that allows borrowers to input their loan details and see the total cost of loan extensions. This helps them understand the financial consequences of taking extensions and make informed decisions.
What is the suggested alternative to taking loan extensions for struggling borrowers?
Instead of taking loan extensions, borrowers should aim to pay off their loans as quickly as possible. Selling the car and buying a reliable used car in cash is recommended to avoid sketchy lenders and stay debt-free.
Chapters
- Predatory lenders target low-income, elderly, and minority homeowners.
- Loans are often based on assets rather than repayment ability.
- Auto title loans can result in the lender seizing the car if payments are missed.
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