Debt Reduction Advice | Debt Reduction Advice

Auto loans are always possible, but if you have less than stellar credit, or seeking a loan after a bankruptcy, there is always a greater price to pay. This price doesn’t, however, always equal an astronomical interest rate. This past year auto loan issuers and lenders have found a way to give sub-prime borrowers a lower interest rate, but that lower rate comes with a greater risk should you get behind on your payments.

Auto lenders now have the ability and technology to install a device in your new car that allows them to remotely turn off your vehicle’s engine should you fall behind on your payment. Consumers who defaulted on their auto loans were subject to repossession, and/or who paid astronomical interest rates and fees grew along with foreclosures and unemployment in the last year. Because of this, along with the financial failure of many big auto firms, sales of this little device have increased dramatically in 2009. Gone are the days of being able to fall months behind on your car loan and simply avoid opening that mail or answering that late night phone call, until you are able to either get current or beg for those missed payments to be rolled onto the end of the loan term. Now if you’re late on a payment a lender can simply shut down your engine; a sure fire way to get the borrower to call in and deal with a past due balance.

Borrowers and lenders alike are seeing this as a useful tool. Lenders can get around the credit risk somewhat by having this device installed in a borrower’s car, and borrowers themselves are agreeing to the device in exchange for lower interest auto loans. Seems like a win-win arrangement. There are stories however, of car engines being shut down while the car is moving, or being shut off prematurely by the lender due to accounting errors and the like. These devices and the terms of shut down are being disclosed by the lender and agreed upon by the borrower before installation. There are a series of warnings that are supposed to happen in the vehicle before the engine is shut down, and car owners are made aware through this method that their loan payment is overdue and engine failure looming.

Is this the answer to risky borrowers and high interest auto loans? Only time will tell. Until then, be aware of what and who is really driving your auto loan and your car itself.