“KEEP YOUR OPTIONS OPEN”
by Contributor
(Sep. 17, 2019) — Do you know how to spot predatory lenders? Use this guide to see the warning signs and learn more about your personal loan options.
When you are in dire need and need some credit, a legit personal loan lender is crucial. They can be the difference between getting out of debt fast or getting tons of debt for years.
A proper personal loan can save you a ton of money in the long run. Even then, the problem comes when schemers and scammers come in the picture. We’re talking about predatory lenders and they give everyone in the biz a bad rep.
If you think someone is trying to get you into a predatory loan scheme, you need to see the signs.
In this guide, we give you 7 signs of predatory lending practices you need to look for. We’ll also offer you three personal loan alternatives that you can pick to help you.
- They Have 3-Digit Interest Rates
One of the biggest signs that someone is a predatory lender comes from their interest rates. If your lender has crazy 3-digit APR on your loans, beware. These people are more into making money than helping you.
The National Consumer Law Center notes that APR rates of up to 300 percent or more are a plague. They put an unnecessary burden on American families, preventing them from paying it off. While this is common in some payday loans and car title loans, NCLC caps “affordable” APR at 36%.
It’s crucial to give your loan agreement a close read and ask them to interpret the loan structure. It’s also vital to shop around before you settle on a personal loan.
- The Lender Calls You First
If a lender contacts you first, this is a clear red flag that they can be a predatory lender. Many legitimate lending companies know that soliciting business is not a good look for the company. If your lender is trying to get you on the scheme before you asked, beware.
Legitimate lenders will not try to rush you into a decision. Many understand that this is a life-changing consideration that needs careful thinking.
Don’t respond to ads to prevent any predatory lending schemes.
- They Encourage False Information
For lenders, your personal information is one of the most crucial pieces of your loan. It’s a vital way to make sure that the loan is as legit as it can be. If your lending company is encouraging you to falsify personal information, that’s a red flag.
False information on loan applications means they only care about earning money from you. They don’t care about your plight or your needs. As long as you sign that form, they are willing to trap you into a potential illegal transaction.
This act will be subject to criminal penalties and will put you or your family in legal trouble.
Never put false information on your personal loan application. This will help protect you from predatory practices in the long run.
- They’re Raising Fees
Points or discount points are the lender’s fee for making a loan. The usual charge for most loans should be around 3% or less, which is a good deal. This includes details and necessities like appraisal and title insurance, so it works.
Even then, predatory lenders will tell you that they would need to shave more points from your loan. This can happen to people with bad credit. This is not true.
Regardless of credit status, finding the right loan for you takes the same time. If a lender or broker is asking for more than 3 points, avoid them.
- They Don’t Let You Shop Around
The practice predatory lending companies have revolves around preventing you to shop around. They will tell you that they are your only chance to get a proper loan. These people will not allow you to compare their scheme with other lenders.
When taking a loan, you need to have enough time to shop around and compare prices. If someone tells you there’s no point in shopping around, it’s crucial to challenge this behavior. If there are companies who are willing to take you even with bad credit, somebody else will.
- They Are Loan Flipping
Refinancing your loans can help you save good money in the long run. Even then, a predatory lender can use this to make a buck from your loan.
The typical rework if refinancing involves getting a new loan with a lower interest rate. It could help you adjust your terms, including low monthly payments.
Some predatory lending companies, however, do what we call loan flipping. Through this, they refinance you into a loan with higher interest rates. Sure, your new loan may save you a bit, but it costs you good money long-term.
Make sure to do your math and compare your costs.
- They Don’t Include Taxes and Insurance
It’s crucial to know in advance if your loan includes payment of taxes and insurances. Some predatory lending companies will show loans that have artificial, low prices. If they are not counting taxes and insurance, they are unscrupulous.
Make sure to ask if the loan has the taxes and insurance included. Make sure that these details are in writing to prevent any issues in the future. If you’re unhappy with their response, get out and find another.
Three Alternatives to Personal Loans
Now you know how to look for predatory lending, this topic should help you make informed decisions. If you’re looking for something different, we have 3 loans you can use as alternatives. These are:
Same day loans
Bad credit loans
Online installment loans
All these loans can help you even on a bad day. If you’re having financial struggles, these are great choices for you.
Beware of Predatory Lenders
Make sure to always be aware of predatory lenders. Check around and always read the fine print before you agree to a loan. Be cautious about all your actions, ask questions, and keep your options open for your next loan.
If you’re looking for more financial walkthroughs, we have everything you need. Take a look at our guides and see which ones fit your situation. We have different information about different types of loans and which ones fit your needs.