Question

What are some steps you can take to protect yourself from predatory lenders?

Answer 1

Predatory lending is can be understood as any lending practice that convinces the borrower to accept unreasonable terms, that can be coercive or exploitative, for a mortgage that the borrower cannot afford. To protect yourself you can take a look at some steps:

1. Don’t agree to a loan without understanding the amount of closing cost, fees, and other upfront costs;

2. Shop around, don’t let anyone rush you into a decision on a loan or home improvement;

3. Question about any additional fees and prepayment penalties, if any. Make sure that those fees are sound;

4. Stay clear of lenders who promise that your loan will be approved despite your credit history or rating;

5. Borrow only the amount you need and can afford;

6. For any loan, make sure you understand all of the terms before you sign it;

Answer 2

Answer: You’ve checked out the interest rate, finance charges, and monthly payments. Everything seems reasonable when compared to other lenders, such as banks. Unfortunately, you still need to be wary, and there are some final things to consider before signing for the loan.

Loan offers that come by phone or mail should be treated with skepticism. Lenders need to be licensed, meaning they are legally allowed to lend money in your state of residence. Lenders should not rush you into agreeing to a loan. Taking your time to review documents will give you more confidence in your decision.

Ultimately, it’s up to you to make the most informed decision about whether you should take out a loan. You need to make sure you can pay a loan through to the end. If your financial situation is in any way unstable—for example, you don’t have a steady source of income or you owe other people money—you should not apply for a car loan or a mortgage on a house that is outside of your price range.