What is Predatory Lending?

Predatory loans refer to home buyers or borrowers who do not understand the credit market and have a low credit history. They are misleading or fraudulent loans. Minorities, immigrants and older groups in society are the main targets of predatory lenders.

Predatory loan

Predatory loans are targeted at buyers or borrowers who do not understand the credit market and have a low credit history.

Predatory lenders often charge higher interest rates directly to loan applicants belonging to minority groups without considering the borrower's credit history.

The characteristics of predatory loans can be summarized as follows: (1) Lenders maliciously sell loans to borrowers;

(2) Yes in loan promotion

Knowledge is the best weapon against predatory loans. To prevent falling into a trap of fraudulent loans, you first need to understand the terminology of mortgages and some basic concepts: You need to understand the basic differences between fixed and floating rates.

You need to understand how principals are calculated and the advantages and disadvantages of interest-only loans.

You should be aware of potentially dangerous clauses in the contract, such as prepayment penalties and mandatory arbitration. For example, mandatory arbitration stipulates that the borrower does not have the right to bring the lender to court on the grounds that the loan is unfair.

You should also know your rights as a borrower. Lenders will say that only they can provide you with such preferential loans, do not believe this. You are a customer and have the right to shop around. You should consult at least three lenders to understand their respective loan policies. Never trust the rhetoric of the lender and fill in false content in the loan contract. This is not good for you. For example, if you report your income high, it is likely that the final monthly payment will rise to a level you cannot afford.

All terms must be supported by written evidence. As the saying goes, "Empty words are without evidence, and words are the basis." After all, you have to abide by the provisions of the loan contract and repay at the interest rate in it, everything else is empty words. Sometimes there are blanks in the contract, and the lender says they will fill it in later, so never sign it. If something in the contract does not apply to you, then cross it out in the contract.

The last piece of advice is never to accept a loan that you cannot afford now or two or three years later. If you choose a floating rate loan, then look at how much your repayments will grow after two or three years. If the repayment amount is too high, you can modify the terms of the loan contract. If someone says that your financial situation will change significantly in two years or you can continue to repay your monthly payment, you must not believe it.