Protect Yourself Against Predatory Lending

Credit-cards-chains-predatory-lending

Predatory lending takes a few different forms. There are mortgage relief scams, payday loans, balloon loans, loan flipping, and prepayment penalties that charge you for paying off a loan early. The most vulnerable to predatory loans (no one is immune) include subprime borrowers with low credit scores/incomes, the elderly, military service members, and anyone facing a financial crisis. Predatory lending can damage your credit score, lead to defaulting on a loan, or trigger an ongoing cycle of debt as well as cause you to lose your home to foreclosure.

Falling victim to a predatory lender may seem unavoidable, but there are ways to protect yourself from lenders who continue to break the law.

OakTree Law specializes in loan modification, bankruptcy, and other financial services that can help clients get through tough times and get back on financial track. To receive the help of a Los Angeles loan modification attorney or bankruptcy lawyer, call 562-219-2979 or request a free evaluation today. 

Predatory Lending Warning Signs

These include if a lender:

  • Offers a deal that seems too good to be true
  • Does not reveal the true cost of a loan
  • Sets interest rates above 36% APR
  • Sets fees too high, which may exceed the amount you’re borrowing
  • Doesn’t have a license or contacts you in suspicious ways
  • Doesn’t check your credit or help build credit by reporting your loan payments
  • Requires electronic payments, which provides access to your bank account
  • Leaves blank spaces in the paperwork, which can be filled in after you sign it
  • Rushes you through the process and doesn’t provide straight answers

Another sign of a predatory lender is if online reviews are filled with complaints. Check the lender’s rating/reviews with the Better Business Bureau or complaints filed on the Federal Trade Commission’s Scam Alerts page.

How to Find an Honest, Reputable Lender

You can determine whether a lender is trustworthy if they check your credit, don’t lend more than you can afford to pay, and disclose all costs associated with a loan. There should not be any pressure to sign anything. To ensure a lender is honest and reputable and offers a loan you qualify for:

Ask questions: Talk to your lender about the details of the loan. Are there prepayment penalties, a chance of monthly payments changing during the loan term, or are taxes included in each payment? If there are add-ons or fees that don’t make sense, question them.

Examine your finances: Determine your debt-to-income ratio (DTI) by dividing your income by your monthly debt payments. This way, you can find out how much debt you can take on. After getting your new loan, your DTI should be about 36% or less.

Take your time: Shop around for a licensed lender and get quotes from at least three of them. If a lender seems to be rushing you, don’t let them and never sign a waiver of rights. This is a red flag so you should back out of the deal right away. Get your settlement statement if ready to close on a mortgage loan, at least three days in advance, and make sure all the terms are sound.

Protect Yourself Against Predatory Lending 

A right to rescission means you can cancel the loan up to three days after signing it. Any reputable lender should provide this option. If you have become the victim of predatory lending, you can report them to government agencies. Other options include refinancing the loan or suing the lender. 

OakTree Law specializes in loan modification, bankruptcy, and other financial services that can help clients get through tough times and get back on financial track. To receive the help of a Los Angeles loan modification attorney or bankruptcy lawyer, call 562-219-2979 or request a free evaluation today.