Collateral Without Seizure: Why Do You Get Poorer with More Loans? Exposing the Chaos of "Car-Backed Loans"

“Collateral not the car, low interest quick loans, relaxed credit checks available”—this type of promotion in the car loan market has caught the attention of many car owners with slightly poor credit who urgently need funds for turnover, becoming their “emergency channel.” However, in practice, many people encounter issues such as principal deductions, hidden service fees stacking up, high early repayment penalties, and even inexplicable vehicle ownership disputes. These car loan traps have become a hot topic for consumer complaints. Faced with a variety of car loan products, how can car owners avoid risks and protect their legal rights?

Converting Auto Mortgage Loans into Financial Leasing

Several netizens have reported on the HeiMa platform that they have fallen into car loan disputes. Mr. Su from Jiangsu said he initially wanted to get a car mortgage loan from a reputable financial company but ended up signing a contract with an intermediary. Mr. Su recalls that he planned to apply for an auto mortgage loan but, under the operation of customer service, it was turned into a financial leasing agreement.

As a result, the principal of this loan was 61,000 yuan. Mr. Su was deducted 6,070 yuan in fees such as handling charges and GPS fees, leaving him with only 54,930 yuan. The subsequent monthly interest costs were high, and he ultimately had to repay over 86,000 yuan, with total “interest and fees” reaching more than 31,000 yuan.

Mr. Zhao from Hubei also needed urgent funds and applied for a car mortgage loan. A 50,000 yuan loan was charged with 9,000 yuan in related fees. Mr. Zhao contacted the lender for an explanation, but they claimed the fees were collected by the intermediary, and even told Mr. Zhao to pursue the intermediary for the charges.

Unfair Charges, Hidden Fees, and Excessive Interest

A search on the HeiMa complaint platform using the keyword “car mortgage loan” revealed nearly 3,000 related complaints. Car owners with minor credit issues are the main complainants, many sharing similar experiences. The issues mainly focus on unfair charges, hidden fees, and high interest rates.

When applying for a vehicle mortgage loan, phrases like “low interest rate” and “collateral not the car” are commonly heard. Mr. Zhang, who has long been engaged in auto mortgage loans, said the biggest pitfalls are interest rates and fees. Although they advertise low interest and collateral not the car, in practice, there are often handling fees.

In addition to explicit fees like processing charges, during the actual process, sales staff may adjust the loan interest rate based on the borrower’s credit status and loan amount.

High-Interest Disguised by Algorithms

Auto mortgage loans are traditionally offline services, requiring the borrower to be present for related procedures. Now, with online platforms, some even use algorithm design and electronic contracts to conceal the true nature of high-interest loans.

Lu Yun, a lawyer from the China Consumers Association, believes that users with credit flaws often need to seek loans through other channels, a demand that some platforms and intermediaries exploit, creating loopholes for profit.

Lu Yun: “Organizations or individuals may use clever naming to increase charges for services or intermediary fees, raising the overall loan cost. They may also use ‘head-cutting’ interest, deducting related fees or interest directly from the loan amount.”

How to Protect Rights Against “Unfair Terms”

Legally, so-called “unfair terms” are essentially standard clauses drafted unilaterally by one party and repeatedly used in transactions. Lu Yun explains that because these are drafted unilaterally in advance, they often include unreasonable restrictions, which is why they are recognized as unfair terms.

Both the Civil Code and the Consumer Rights Protection Law clearly stipulate that if such clauses clearly deprive the other party of rights or exempt the drafter from responsibilities, they may be deemed invalid. In other words, these clauses have no legal effect in judicial practice. If unfair clauses are found when signing a contract, consumers can seek mediation through third parties like consumer associations, or file complaints with relevant authorities. If sufficient evidence is available, they can also pursue court litigation or arbitration to defend their rights.

Lu Yun reminds borrowers: When applying for auto mortgage loans:

First, choose reputable institutions and channels to ensure fund safety and prevent issues like hidden fees and aggressive collection from the source, protecting your rights later. Second, honestly declare the purpose of the loan, personal income, and other information to relevant agencies. Pay attention to the long-term impact on personal credit. Be objective and truthful throughout the contract signing and loan selection process, and enhance your risk awareness.