Sings that You Are Dealing with a Predatory Lender that Should Be Avoided
- Author: Kelly Cooke
- Posted: 2024-08-27
Borrowing money can sometimes be necessary, but it can also be dangerous. If you end up dealing with a predatory lender, you will end up in financial trouble that may not end until you declare bankruptcy. Sometimes, avoiding predatory lenders is a case of spotting the signs and running the other way. Instead of having to complain about and fight a predatory lender, the best way to deal with them is to never do business with them in the first place. Here are five signs that you may be dealing with a predatory lender.
Scores of Hidden Fees
You really need to check the fine print very closely when you are taking out any sort of loan. While the lender has an obligation to disclose fees under the Truth in Lending Act, they may be burying these fees in the small print or shading them with very innocuous sounding names. The next thing that you know, the sum of your fees is like paying an entirely new interest rate. When a lender tacks on a multitude of fees to your loan, it is a sign of a predatory lender that is interested only in their own profit. While most loans have fees, reputable lenders are upfront with their fees, and they are relatively bearable. Predatory lenders try to profit by gouging you on fees.
The Interest Rate Is Sky-High
You may be relying on your state's usury laws to protect you. However not all financial products are subject to these state laws. You need to independently pay attention to the interest rates to look at what seems unreasonably high. While some loans do features rates higher than 10%, you need to start asking questions if the rate is higher than 20%. You should also compare at least three quotes for each loan you are trying to get. If there is a lender that seems to be an outlier in terms of their rate, you should steer clear of them as a possible predatory lender.
Pressure
A reputable lender will simply make an offer of a loan available to you and answer any questions that you may have. While they may try to sell you a little, they will not apply pressure on you to sign on the dotted line. Predatory lenders will apply a pressure campaign because they will make gobs of money on the fees and the very high interest rate they are charging you. Repeated calls or attempts to contact you after you have asked about a loan is a sign of a possible predatory lender, and you should look upon it with suspicion. This would be even more true if you have already told the lender to give you some space to make a decision or not to contact you anymore.
Shortcuts on Paperwork
Reputable lenders will have you fill out all the paperwork in order to qualify for the loan. There will be no shortcuts or things that you could skip. They will also insist that you answer every question honestly. When a lender tells you that you can skip certain parts of the paperwork or that certain things are "not important," it is a sign of shadiness. This is even more egregious if they are telling you to lie on your paperwork in order to get approval. This is encouraging you to commit fraud and is a sign of a disreputable lender. You can get in serious trouble for lying on a loan application. It is called bank fraud. Any lenders that asks you to commit fraud should be avoided and reported to the relevant authorities.
Bait and Switch
When the terms of the loan that you are offered end up being far different from the one originally discussed, this is a sign of predatory lending. This will often happen because the lender is bringing you in the door with loan terms that you would have never been able to qualify for in the first place. Then, once you are invariably turned down for that loan, they will offer you another one at a much higher interest rate with onerous fees. This is a class bait-and-switch, and it happens all too often in the shady lending industry. While some things may end up changing based on your own individual situation, use your judgement as to what constitutes a bait-and-switch.
