When you need credit, choosing the right personal lender is important. He has the potential either to make you or break you. The personal lender helps you to get out of the debt or get dragged you in debt and immerse you in bankruptcy.
What Is A Predatory Lender?
Predatory lenders are unethical lending practices carried out by the lender to entice, induce and assist the borrower in taking a loan that is accompanied by high fees, a high interest rate that the borrower cannot afford.
There are many times in life when you need a loan like purchasing a car, a dream home, emergency requirements, business expansion, educational purpose and many more. You might also require at times to consolidate debts or pay off long term debts. During such situations, you will be in need a lender through whom you can borrow the desired finance.
Although there is a number of good lenders who genuinely help the borrowers to avail the loans at the best interest rate, they are equally accompanied by predatory lenders, who take advantage of the consumers and impose unfair or abusive loan terms. These lending practices are disadvantageous to the borrowers and most frequently occur with the low-income families and minority borrowers.
Predatory lenders often aim at the creditor’s profits when they are not able to make the payment. They use false advertising and foul sales tactics to make the borrower take loans from them. However, there are few signs from which you can make out these foul plays and stay away from this predatory lending.
Following The Signs Of Predatory Lending
Before signing any loan, do extensive conduct research online and feedbacks from your friends and relatives about the different types of loans. Make a comparative analysis against the interest rates to determine whether the lenders have any complaints against them. Stay away from a loan which requires
No Credit Check
For bank consumers, having a good credit history is important to improve the chances of getting a loan. Perhaps, the credit score is the most vital component to make yourself eligible for the loan. However, with predatory lending, it might be easier to get eligibility for the loan without a good credit history. Apparently, there are higher risks of paying huge interest. Paying higher rents would obviously put you in more financial burden making things even worse. So beware of this sign.
Alarming Interest Rates
One of the biggest signs of predatory lending is the alarming three-digit interest rates. For instance, the average APR rates of payday loans and car title loans are generally 35-37 percentage. Nevertheless, you cannot find these rates with the predator’s lenders instead their APR usually range from 280 to 300%. So, when you are borrowing a loan, ensure that you properly read all the terms and conditions and understand how the loan terms and interest rates are structured because agreement terms predominantly highlight the interest rates.
Needs Cautions When Loan Payment Requires ACH
Automated Clearing House or ACH are electronic payments that send payments directly from the checking account. Although it is easier for making your transactions yet there are plenty of risks behind it. You will not know how much you are paying. In many instances, you would be paying more than you should, and this could eventually drain your account, which ultimately results in missing other payments and rack up the penalties. It also leads to overdrawing your account.
People generally go for refinancing to consolidate debts. However, the predatory lenders make use of this opportunity and try to ditch you with the lending practice called loan flipping.
While the transaction can add a few thousand dollars to the homeowner’s account, however, the most amount is eaten by high-interest fees and prepayment penalties. Well-known investors and authentic money lenders are the best sources of flipping loans.
In fact, sometimes flipping turns out to be a criminal activity because some people illegally flip the property at the artificial inflation rate. So, when you find things fishy, it is wise to stay out of it.
How To Avoid Predatory Lending?
When it comes to purchasing an asset or property, predatory lending is something you should try to stay away from. You must try doing these things
- Make sufficient research and analysis before you approach a lender
- When front fees are not convincing, don’t hesitate to question it.
- Always go for a licensed lender
- Establish your eligibility to get qualified for the loan
- Do not sign on documents containing blank spaces
- Do not let yourself rushed for the loan processes
- Stay away from loans offered through phone, mail, and solicitations.
- Do not allow anyone to convince you for the loan amount.
Many states have laws preventing high-interest loans. But still, there are many greedy lenders who take advantage of the minority communities and make them spiral in debts. So, it is important to watch the signs of predatory lending mentioned above and stand firm to all the loan processes without getting pressurized or convinced by someone for a loan.