Predatory lending is the unfair, unscrupulous and misleading practices of some lending companies when you ask them for a loan. In the United States, there is no legal description of what a predatory lending practice is but the FDIC generally classifies any lending that passes on offensive and inequitable loan conditions to a borrower as predatory.
The term is used to describes any practice that convinces a borrower to consent to a loan that has terms that exploit and unjustly profit the lender at the expense of the borrower. These shady lenders usually try to exploit a borrower’s ignorance of loans, terms and financial conditions.
Predatory lenders typically target minorities, poor people, the elderly and the semi-educated. They additionally go after individuals who require quick money for a crises, for example, emergency expenses, making a home repair or auto installment. These moneylenders likewise target borrowers with credit situations or individuals recently got laid off. This could prohibit them from normal mortgages or credit extensions, even though they have plenty of home equity.
Legally, the methods used by predatory lenders are not outright criminal but they almost always leave their victims with bad credit, facing bankruptcy and loss of their homes.
Most Predatory Loans have been identified as likely leading to the borrower’s ruin. Most practices are disputed whether they are predatory or not but the truth is that when a lending practice creates a minefield where in most instances, paying back without problems is unlikely, it can be cited as predatory. Here are some common examples of Predatory Lending:
As we said before, most predatory lending practices are downright immoral but hardly proven to be illegal or criminal by law. The most effective form of prevention from falling victim to a predatory lender is education. Here are some ways to ensure that you do not find yourself in this situation
Even though there are more laws being made against predatory loans in a lot of states, there are still a lot of predatory lenders out there. Don’t think you have legal solutions if you get trapped because these practices are borderline and hard to prove as illegal in court. Be smart and protect yourself. If you are already in a loan that could be considered “predatory”, contact a financial advisor to help you with a debt consolidation plan and other solutions available to you.