How to spot and avoid predatory lending
Predatory lenders promise loans that are "too good to be true" and pressure borrowers to take them on the spot. Here's a few things you or your family and friends should know about spotting and avoid predatory loans:
How to Spot a Predatory Loan
- Balloon payments.
- High interest rates.
- Monthly payments you can't afford.
- Penalties for early pay-off of the loan.
- Unauthorized refinancing of your loan.
For more information on how predatory loans work, read about the eight signs of predatory mortgage lending.
How to Avoid a Predatory Loan
- Always shop around.
- Ask questions.
- If you don't understand the loan terms, talk to someone you trust to look at the documents for you.
- Don't trust ads promising "No Credit? No Problem!"
- Ignore high-pressure sales tactics.
- Don't take the first loan you are offered.
- Remember that a low monthly payment isn't always a 'deal.' Look at the TOTAL cost of the loan.
- Be wary of promises to refinance the loan to a better rate in the future.
- Never sign a blank document or anything the lender promised to fill in later.
To get help, contact one of these national organizations.