Predatory Lending Practices

Predatory lenders benefit from our willingness to be led away from the truth by what we would like to believe. Put another way, if it seems too good to be true it likely is. Predatory lenders are counting on your desire for immediate gratification to override reason in the matter of home loans.

In recent years, the average American debt burden has increased as savings have fallen. Correspondingly, defaults and bankruptcies are also on the rise. Traditional wisdom might suggest that obtaining a home loan is difficult, if not impossible, under these circumstances. Enter predatory lenders.

Predatory lenders are known to target specific groups, such as those living with limited income, senior citizens, military personnel and those with negative credit profiles. They are willing to make the high risk loans that more traditional lenders will not makefor a price. Often that price includes one of your most dear possessions, your home.

In this climate, those with poor credit do not have to wait until their credit improves to secure a loan, they can get one now at exorbitant interest rates. This privilege will cost several thousands more than more traditional loan options.

Predatory lenders can often seem like rescuers at the outset. They seek customers among those who have few other lending options and/or limited access to information about other available options.

You can avoid being taken in by a lender whose only goal is to take your money and run if you educate yourself. Some things to know:

•  Be suspicious of lenders promising the moon and stars.

•  Look for potential lenders on watch lists such as those compiled by the Better Business Bureau and Secretary General's Office.

•  Do not do business with lenders that initiate contact. It's likely that you have been targeted you for a reason.

•  Shop around and compare offers.

•  Do not share any identifying information (social security/driver's license number) over the phone.

•  Do not share identifying information in person until you are certain that it will be safe.

•  Carefully review repayment terms and fees. Predatory lenders often include terms in the fine print which make repayment in full virtually impossible. In fact, it is not unusual to find that no matter how much you pay to the lender you owe even more. In the end, only your home will satisfy the debt.

Predatory loans further undermine the financial position of an already vulnerable consumer. The risk of worsening a credit profile with late payments, default and foreclosure increases exponentially with predatory loans. The cycle can be difficult to escape. If you are having trouble securing a loan with reasonable terms, talk with your credit union representative to explore options. In the end, your best option may be to wait until your credit profile improves.