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.