Beware of predatory lending
One of the dangers facing consumers with bad credit comes from predatory lenders. These are lenders who try to primarily take advantage of people that have trouble borrowing from a legitimate lender.
Predatory lenders often target elderly and low-income consumers, people with bad credit and those who are unfamiliar with home loans and mortgages.
While people with a good credit score have more options when borrowing money, those with bad credit or who fall into one of these categories tend to have fewer choices. As a result, they may be susceptible to offers from predatory lenders.
However, predatory lenders do not offer access to money at fair rates with reasonable rates and terms. Instead, their offers generally involve incredibly high interest rates and fees, as well as unnecessary costs and unaffordable repayment terms. The offers from such lenders may even be illegal.
Consumers should be careful any time they are offered "bargain loans," deals that promise having no credit is no problem, and offers that are only said to be available for a short time.
Borrowers should question whether they are encountering predatory lending if they feel pressured, and if they are promised next-day approval or "guaranteed" low-interest loans.
Instead of rushing into a loan agreement, consumers need to make sure they understand the terms of any loan before agreeing to borrow, and check that what they are asked to sign is the same as what they discussed with the salesperson.
Consumers with bad credit should do their homework to make sure they are dealing with a trustworthy lender. To do this, they can request references from the lender and check them out. Additionally, a phone call to the local Better Business Bureau should help determine whether there have been any complaints about that specific lender.
Separately, it is worthwhile to compare the lender's rates and total costs to those offered by other lenders and local banks to determine if they are in line with what else is out there.
Specific examples of illegal predatory lending scams include loans that require advance fees. It is against the law for anyone to request or accept payment for their services before the consumer actually gets the loan or credit.
Additionally, if companies offer to "release" the consumer's mortgage for a fee, be aware that a mortgage cannot be released for a fee.
To comment on this story, write Editors@CreditCards.com.
More credit card news.
Published: May 25, 2007
- Rejected for credit: When to take no for an answer – Being turned down can be crushing, but it can be a sign you need to take seriously ...
- Paid a charged-off debt; now what? – It’s not enough to just pay a charge-off and forget about it. There are some cases in which the information about the paid charge-off doesn’t get to the credit reporting agencies ...
- Tips, tools for setting up a side gig to get out of debt – A part-time job on the side can help increase income to pay off debt ...