Is GAP insurance for an auto loan mandatory?
Get Legal Help Today
Compare Quotes From Top Companies and Save
Secured with SHA-256 Encryption
Is GAP insurance for an auto loan mandatory?
I bought a car last week. The dealer got me a finance company. But according to the dealer, the finance company insisted that I buy GAP insurance for the cars value before they would approve the loan. My friend was in the room and witnessed it; even though I stated I had bought it as a rider on my auto insurance policy which was much cheaper.
Asked on May 1, 2011 under General Practice, Connecticut
Answers:
SJZ, Member, New York Bar / FreeAdvice Contributing Attorney
Answered 13 years ago | Contributor
Finance companies, banks, lenders, etc. are not forced to make loans--that is, they voluntarily choose to loan to people. (The only restriction is no discrimination against a protected category; e.g. can't discriminate on a racial basis in lending.) Given that they do not have to loan to anyone, they can put requirements or restrictions on their loan. It is perfectly legal, therefore, for a lender or financing company to specify that a certain type and amount of insurnace be purchased before they will make the loan; this is analogous to a bank requiring adequate homeowner's insurnace, naming the bank as a payee, prior to approving or making a mortgage. You can look for a different lender, of course; but any lender has the right to specify the insurance you need to have.
IMPORTANT NOTICE: The Answer(s) provided above are for general information only. The attorney providing the answer was not serving as the attorney for the person submitting the question or in any attorney-client relationship with such person. Laws may vary from state to state, and sometimes change. Tiny variations in the facts, or a fact not set forth in a question, often can change a legal outcome or an attorney's conclusion. Although AttorneyPages.com has verified the attorney was admitted to practice law in at least one jurisdiction, he or she may not be authorized to practice law in the jurisdiction referred to in the question, nor is he or she necessarily experienced in the area of the law involved. Unlike the information in the Answer(s) above, upon which you should NOT rely, for personal advice you can rely upon we suggest you retain an attorney to represent you.