Predatory lending is not new, but most people have no idea of its existence. It is very pervasive in most states in the USA. Predatory lending is a practice where lenders prey on the elderly, minorities, low income and other groups of people who are not able to afford auto loans, mortgages, personal loans and other types of loans because of their financial situation.
It is simple things like low income, mortgage loan rejection and financial hits that could land someone in the hands of a predatory lender.
What are predatory loans?
They are not specific loan types; predatory loans are any types of loans given under excessive terms and conditions like unusual payment periods, high interest rates penalties and fees plus extra costs.
Some examples of predatory loans are;
Predatory Mortgage loans
This is commonly used on first time mortgage borrowers. If you are trying to get the morgue for the first time, you will more than likely run into a predatory lender. They also prey on people who have a mortgage and trying to re-finance their home. Most lenders will offer you loans that sound good but have high application and closing costs.
Payday loans are quite convenient. They are easy to qualify for and get approved within 24 hours. To qualify for a payday loan, you do not need to have a good credit report or clear off other loans. You only need proof or employment, ID and a bank account.
The charges on these loans are very high making this type of loan very dangerous. Since the application and approval are done online, it is very easy to fall into a trap by the lender. Predatory lender imposes extra and hidden charges on these types of loans so they can earn more from the borrower.
This means that the borrower leaves the title of their car in the hands of the lender temporarily. The lender then gives you an agreed amount of cash for a specific period of time. You have to pay back the amount plus interest to get full possession of your car. If you do not, you will end up losing your car to the lender legally. Predatory lenders prey on desperate people during desperate times and end up snagging their vehicles when they cannot make the payments on time.
How to protect yourself against predatory lending
Most predatory loans or lenders have the following in common. When you see the signs, it is better to investigate before you take out a loan to avoid any financial issues
They have very high-interest rates- loans like payday loans have unusual interest rates imposed.
There are hidden fees and penalties – this Is why you always have to read the terms and conditions twice in case you miss any hidden costs by the lenders.
There is no contact information on their website.
People who take predatory loans wither knowingly or not often feel like they cannot qualify for traditional loans when that is not the real case. You can get secured loans from multiple lenders or other loan types to avoid losing cash over predatory lenders.