5 Clues You Are Dealing With A Predatory Lender Bank and credit
Consumers are often told to stay away from predatory lenders, but the problem with this advice is that a predatory lender doesn’t advertise itself as such.
Fortunately, if you’re on your guard, you should be able to spot the signs that will tell you that a loan is bad news. If you’re afraid you’re about to sign your life on a dotted line, watch for these clues first.
You are offered credit, even if your credit rating and the story is terrible. It’s probably the biggest red flag there is, according to John Breyault, vice president of public policy, telecommunications and fraud at the National Consumers League, a private nonprofit advocacy group in the District of Columbia.
“A lender is in business because he thinks he is going to be paid off,” says Breyault. “So if they don’t check whether you have the option of repaying them, by making a Credit check, then they plan to take their bank another route, like offering high fees for the loan and setting it up in a way that puts you in a cycle of debt that is very difficult to get out of. “
But, of course, as important as the clue is to stay away, it can be difficult to listen to the inner voice of reason. After all, if nowhere else is giving you a loan, you may decide to work with the predatory lender anyway. This is why many industry experts believe that while a bad loan is transparent about its seriousness, it probably shouldn’t exist. After all, only consumers who are desperate for money are likely to bet that they can pay off a loan at 200% interest – and get away with it unscathed.
Your loan has an incredibly high interest rate. Most states have usury laws preventing interest rates from entering that APR 200 territory, but the laws are generally weak, industry experts say, and lenders bypass them all the time. So you cannot assume that an interest rate that seems really high is considered normal or even within the parameters of the law. After all, attorneys general successfully sue payday loan services and other loan companies quite frequently. For example, in January of this year it was reported that after the District of Columbia attorney general sued loan company CashCall, they settled for millions of dollars. According to media reports, CashCall has been accused of offering loans at interest rates of around 300% per annum.
The lender makes promises that sound too good to be true. If you ask questions and get answers that make you sigh with relief, this could be a problem.
No one is suggesting that you be cynical and assume that everyone wants to have you, but you should scrutinize your papers, explains David Reiss, professor of law at Brooklyn Law School in New York.
“A lot of times predators make all kinds of oral promises, but when it comes to signing on the dotted line, their documents don’t match the promises,” Reiss says.
And if they don’t sync, assume the documentation is correct. Don’t go with what the lender has told you.
“The courts will, in all likelihood, withhold from you the promises you made in the signed documents, and your testimony on the oral promises is unlikely to hold as much value,” Reiss said. “Read what you are signing and make sure it matches your understanding of the transaction.”
You are dealing with sellers in a hurry. You may have walked into an office on your own and on your own, but suddenly feel like you won’t be able to leave the premises without taking out a loan?
This is a very bad sign. Go out.
John Henson, vice president of LendingTree.com, said a red flag is “overly aggressive selling tactics, including the use of language that obscures the real terms of the mortgage.”
He also says that you might have problems if a lender can’t explain some of the vocabulary associated with the loan, especially regarding fees, or if you have difficulty obtaining the loan terms from the seller immediately, such as the interest rate. , the amount of the payment or the number of payments.
The loan is really easy to get. Borrow money, especially a lot, should be difficult. After all, if you are going to borrow tens or hundreds of thousands of dollars for a car or a house, a lender would be crazy not to take a hard look at you and take a look at your credit score and make sure you can pay it off. . Failure to do so, of course, is part of how the country entered a recession about 10 years ago. Mortgage companies were not doing enough to find out if consumers could afford to pay off what they borrowed.
So if you’re in the process of getting a loan, especially a big one, and you’re like, “Wow, that’s easy, almost too easy,” you are probably right. Breyault says you should be especially careful when you are in a parking lot and see signs like “Secured Loan” and “No Credit Needed.” These dealers are known to have predatory lending practices.
“The purpose of these car lots is as much to sell you on a high-interest loan as it is to sell you a car,” Breyault explains.
And if so, that raises another question: if you are paying off a fortune with a low-cost loan, how confident can you be that the same company is selling you a quality product?