Taking advantage of people is an art form in this day and age. Unfortunately, there seems to be no sign of dishonest activity slowing down any time soon. While some criminal minds have the ability to deceive and create outright scams that rob people of their hard-earned money, most dishonest businesspersons thrive on the philosophy that consumers don’t know any better than what they are told (or at least what is implied) and thus willingly throw their money away in ignorance. Usually, these businesses are “legal” in the sense that you can’t sue them for merely being dishonest, only for lying. Therefore, lending is one of the most lucrative businesses for predators to exploit the mass population. For those consumers not mathematically inclined, comparing numbers and carefully reading fine print can be tedious. They would rather just pay attention to the large advertisement promising* a low payment and sign a contract in good faith. Eventually, however, they are horrified to discover just how expensive one mistake can be. Don’t become a victim of predatory lending. Here are some tips in spotting overt predatory lending companies and additional tips in scrutinizing those companies that might be untrustworthy.
How To Catch A Predator
The old clich that “if something sounds too good to be true then it probably is” rings true, at least in the case of the lending business. The most common practice of predatory lending companies is to pressure borrowers to make a deal on the spot. Because impulse buying is a goal, they are actually counting on you not thinking it through to make their sale. One of the first signs that a company might be predatory is just how desperate they are for you to sign.
As far as considering actual financial abuses, here are a few unfair practices that predatory lending companies will use. When a company charges excessive fees that are not directly reflected in interest rates, then they are bullying you for more money. (It’s comparable to stealing your lunch money!) Sometimes it is difficult to spot these fees because they can easily disappear into the financing. A good rule to remember is that in most lending institution fees should not amount to more than 1% of the loan. On predatory loans, it’s not uncommon to see fees totaling 5% of the loan.
The company may impose prepayment penalties, which are basically punishment fees for paying off the loan early. These policies are especially important to review if you are planning on refinancing or if you are thinking about paying off your loan early. As much as 80% of all subprime mortgages charge prepayment penalty fees, while only 2% of prime market home loans carry prepayment penalties at all. Prepayment plans that go beyond sneaky to predatory, involve prepayment penalties that are effective for over three years and or that cost more than six months of interest. Other predatory tactics to beware of include loan flipping, that sees the institution refinance a loan without your permission, with no extra benefits, and thus draining your equity, institutions charging for insurance or other needless products, mandatory arbitration, which forbids borrowers from seeking legal help if they are threatened by abusive terms and of course, very high interest rates.
How To Avoid Predatory Loans
How can you avoid predatory lending? Aside from paying attention to clear signs of dishonesty of abuse you can also remember these tips. As with any other kind of product, never accept the first deal you come across until you shop around. Whether a company is dishonest or completely forthright, there is always a chance you are paying too much. You can also learn a lot buy asking questions. If you are stuck on the phone with a persistent salesperson then you might as well start asking the hard questions, especially any sketchy details you find confusing. If you don’t understand the language used, then ask a friend to review the information for you. Be cautious of any lenders that offer to refinance the loan to a better rate in the future. They may mean refinance without your permission if they have a great deal, then why not offer it now? Finally, be very weary of any offers to sign a blank document that can be “filled out later”. You sign your life and money away when that happens, regardless of whatever is not put in writing. Use caution when dealing with any lending institution. Sure, they’re kind enough to lend you money now but ultimately, it’s your money and you should be confident that you’re dealing with a fair and professional company.