4 Tips For People With Bad Credit To Protect Themselves From Predatory Lending

Automotive Finance, Credit Education, Used Cars

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predatory car loans

Auto loans are a necessary reality of Canada’s vehicle purchasing landscape. Most people can’t afford, or are unwilling, to drop the entire cost of a car, up front. In the used car industry, loans can help to maximize a vehicle’s affordability, if the applicant has the right kind of credit. That being said, consumers with less than stellar credit should always be on guard against the threat of what’s known as predatory lending.

While there are plenty of reputable lenders eager to work with you despite your credit, there are still some who will try to take advantage. People with bad credit, are especially susceptible to this kind of scam, as they often find themselves obligated to accept even the worst of conditions.

Each year in Canada, more and more used car purchases are being backed in part by lending, meaning that more and more used car buyers are finding themselves at risk of being scammed. According to The Globe And Mail, the average Canadian spends $570 a month on their auto loan. The point being, the stakes are high and the risk is everywhere. As such, people with bad credit should always bear in mind these 4 tips for protecting themselves from predatory lending.

#1 – Avoid Loans You Can’t Pay Off

Predatory lenders stand to gain so much more from debtors that they can keep bound to them for longer. Theoretically, predatory lenders don’t even care if you ever pay off the debt. As long as they keep getting checks and boosting the interest rate, they maintain a more profitable position.

Because of this, it’s important for people with bad credit to really evaluate their situation. You should always demand that lenders provide you with a comprehensive cost disclosure. This will give you an all-encompassing break down of your expenses, as well as a timeline for payment.

If you know that the monthly payments, rates, or timeframe do not comply with your own financial condition, it’s important to pass on the offer. Fortunately, Ridetime works with lenders who can help you find a path to approval without having to risk everything you own.

#2 – Look Closely For Balloon Payments

While you’re looking at those cost disclosures mentioned in tip #1, be on the lookout for what’s known as a “balloon payment”. In a cost disclosure, you may see a row of consistently small monthly payments, followed by one giant payment that may force you to refinance. This is a bullying tactic that some predatory lenders use to strong-arm you into refinancing.

Refinancing is when you take out another loan to pay off an original loan. While refinancing may sometimes be in your best interest, if done at the wrong time, it can be a vast increase in the rates and duration of your debt.

Only accept loans with constant and manageable monthly payments. Never allow a lender to force you into refinancing, as it could completely tank your fiscal well-being.

#3 – Mandatory Arbitration Clauses

Arbitration is a legal term for a type of personal dispute mediation outside of court. It functions as a way for customers and businesses to resolve their differences without accruing costly legal fees.

While in many cases arbitration can be helpful to all parties involved, when dealing with a big bank or financial institution, arbitration will almost always end in their favor. If your lender wants you to sign a mandatory arbitration, you’ll be unable to sue them in a neutral court of law, should any problem arise.

#4 – Language Is Everything

Perhaps the sleaziest way that predatory lenders take advantage of people with bad credit, is by writing the lending agreement with intentionally deceptive language. By using vague language and seemingly innocuous adjectives, lenders can muscle people with bad credit into helpless situations.

For example, language stating, “No fees for the first 3 months!” might seem like a steal. However, this language enables them to just push those fees back to a later date, and create a single massive payment to again force you into refinancing.


Ridetime’s network of lenders are not only some of the most reputable in Canada, but also have a variety of approval policies intended to protect people with bad credit. Since the Canadian used car industry is increasingly driven by lending, there will always be a few leeches looking to suck consumers dry. Ridetime puts its customers first through all phases of the used car buying process, and will work diligently with lenders to find approval and protection for anyone who needs it.


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