Avoid Predatory Lending

Predatory lending is defined as ‘any lending practice that imposes unfair or abusive loan terms on a borrower’. This means that the lender, or the person who is going to be letting you borrow money, essentially cons you into accepting a loan with terms that hurt you. It could be hidden fees, unnecessary insurance, huge penalties, or any other number of sneaky, shady things that they include without your knowing or make sound way better than they are. According to the website of Gagnon, Peacock & Vereeke, P.C., predatory lending is a cause for wrongful foreclosure. Don’t let those guys get your home. Here are a few signs of predatory and unfair lending to watch out for.

Excessive Fees. If you look at the fees you’re supposed to pay and they feel way overblown, then they probably are. With a typical loan, the fees are somewhere around 1% of the actual loan amount, but with a predatory loan it is inflated to around 5%. Watch out to make sure you aren’t paying more than you need to.

The Switch. Always read that document all the way through before you sign it. Often predatory lenders will ‘bait’ you with a good deal verbally, then do a ‘switch’ and get you to sign a document that is different than what they explained to you. Never sign a second set of documents that won’t be shared with all parties involved, and never leave blanks for the lender to fill in. You will regret it later.

Refinancing Often. Predators will get you to sign an unfavorable loan with the promise that it can always be refinanced later. What they hide is that each refinance will include more fees and can possibly increase your monthly payments and make you lose equity on your home.

Additions. Sometimes a predatory lender will try to get you to add in unnecessary insurance or other products that you either don’t need or are a rip-off on their own. Don’t let them trick you into it, and never let anyone convince you to get a loan for more money than you need or more than you are able to pay off in a reasonable amount of time.

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