Do Not Fall Victim to Predatory Lending

In times of financial turmoil, most people are not as discriminating as they would normally be when taking out a loan, opening the door for predatory lenders to swoop in and take advantage. In order to keep from falling victim to unethical and even illegal lender practices, it is important for a borrower to be informed of what to look out for. Often times, borrowers are bullied into accepting predatory terms as a result of fraud or coercive behavior.

Signs of Predatory Lending

Whenever a possible borrower is approached by a lender, it is always in his best interest to carefully consider the terms of repayment and the situation at hand. Here are some key aspects to take into account before accepting a loan.

• Is it the whole truth and nothing but the truth? If there are inadequacies in the documents provided by the lender, be it withholding or outright lying about important information, the debtor should reconsider the loan. Keeping a borrower from knowing every detail of his loan should always raise a red flag.

• Check all the fees. A loan’s fee should typically be somewhere around 1 percent of the total loan amount. However, it is not uncommon for predatory lenders to apply fees upwards of 5 percent. When considering the fees the loan comes saddled with, it is important to recognize the difference between fees which are simply inflated and those which may be accrued as a result of a penalty. One penalty fee commonly applied to predatory loans is a prepayment charge, which punishes borrowers for paying off the loan early.

• Is this the best option? Predatory lenders are known to steer borrowers towards higher-cost loans, when in fact said borrower could have qualified for one with better terms of repayment. The best way for a borrower to avoid falling victim to this kind of behavior is to seek out other lenders and compare his options.

Further Protections

Aside from being informed, there are other protections afforded to borrowers to keep predatory lenders at bay. Federal and state governments have put laws in place to limit predatory actions, such as requiring full disclosure by lenders — but unfortunately, predatory lenders continue to find ways to circumvent these restrictions. The best defense against predatory lending practices is seeking out the expertise of a West Palm Beach bankruptcy attorney. The team at Kelley Kaplan & Eller holds extensive experience in protecting debtor rights, so be sure to reach out with any concerns.