|
Handout: What Is Predatory Lending,
and How Can It Affect You?
Most lenders are trustworthy—but
unfortunately, some lenders are not. They sometimes direct
borrowers away from loans with more affordable interest
rates. Instead, they offer loans that carry very high interest
rates, questionable fees, and unnecessary charges. These
practices are considered predatory lending.
A predatory lender may be a large company
with a name you know. Or it may be a small company or a
loan broker you’ve never heard of. But predatory lenders
have the same traits. They
- Offer loans based solely on the equity
in a home,
not on the borrower’s ability to repay the loan
- Charge unusually high interest rates
for loans
- Add excessive points to a loan without
lowering the interest rate
- Include excessive fees
- Tack on unnecessary costs, such as
prepaid single-premium credit life insurance
With or without these extra charges, you
may find it difficult or even impossible to repay the loan.
If you fall behind in your payments, more charges may be
added. Or the lender may suggest that you refinance the
loan to lower your monthly payment. But the unpaid payments
may be added to the new loan amount, costing you even more
money over time. Then the loan becomes even more difficult
to repay. If you can’t make the payments, you could
lose the items you purchase.
*To order a free copy of the guide Borrowing
Basics: What You Don’t Know Can Hurt You, call
(800) 605-7100.
Previous
Page | Next Page
|
