While predatory lending may be difficult to spot, it is possible to identify the signs of a predatory loan. It can occur in several ways, including high-interest rates, excessive borrowing costs, balloon payments, and encouragement to repeatedly flip loans. If you see any of these signs, it is best to walk away. It is important to research your lender and the products they offer.
#1. Avoiding high-pressure sales tactics
When you are looking to buy a home, one of the most common ways to fall victim to a scam is by falling for a high-pressure sales pitch. Be wary of any company or person who tells you that you will earn millions in a matter of weeks. Never pay money in advance for anything, especially if you are not sure that the company is legitimate. Also, avoid responding to unsolicited emails asking you to transfer money or provide personal information.
#2. Asking if there is an application fee
Scammers often contact potential victims by phone, email, social media, and other means. Typically, these scammers will request payment before sending out funds or requesting personal information via an unsecured website. Some of the beste forbrukslån (best consumer loans) without asking for any money upfront. These are the ones to look for!
Legitimate lenders will never ask for an application fee upfront. Although some lenders do charge an application fee, these fees are usually deducted from the amount borrowed before you receive it. Never pay any fees out of your own pocket unless you are sure the lender is legitimate. Legitimate lenders will not guarantee a loan before reviewing your credit report or checking your application information.
When choosing a lender, make sure the company is registered in your state. If it is not, contact your state’s banking regulator or attorney general’s office to confirm the legitimacy of the lender. You may be dealing with a scammer if you cannot find the company’s website on a government registry.
#3. Asking if there is a credit check
Although some lenders do not require a credit check when giving out money for borrowing purposes, you should never assume that a lender is not going to do one. While some legitimate lenders may offer bad-credit loans, these institutions still run credit checks to determine your repayment capacity. If a lender does not perform a credit check, it is likely a scam. Moreover, a scam lender will use this information to deduct additional hidden fees.
Always be wary of lenders who promise low-interest rates or no credit check. These companies are likely scams. Also, do not fall for high-pressure sales tactics. Scammers may claim that it is a limited-time offer, and you must act quickly to avail the deal. In addition, they may contact you out of the blue to get your personal information and ask for payments in unusual forms.
The lending industry is highly regulated. The Truth in Lending Act requires lenders to disclose costs in detail and to provide approval. But some of these awful scammers do not follow these laws and might offer solutions that real lenders cannot legally provide. For more information, visit the website of the Federal Trade Commission and read their tips, as well. Otherwise, as a result, consumers should be aware of this fact when searching online.
#4. Beware of unregistered lenders
Beware of no-credit-check loans and payday loans – although they can be a great option if you have bad credit – as these come with high-interest rates. Many scammers target high-risk individuals by purchasing lists of people searching for loan products online. Always be on the lookout for companies that advertise their loan products online and make sure that they are registered in your state. In case of doubt, contact your state’s attorney general’s office.
Never pay any fees upfront to lenders – if you are asked to wire money, be suspicious. The money is unlikely to get to the lender’s account quickly. A legitimate lender will offer a long period to accept the funds. You should never send money to an unregistered lender, regardless of their shady tactics. Most reputable lenders will provide you with a link to verify the amount you owe.
Beware of lead generation websites – these companies sell your information to predatory lenders. Many big websites use lead generation services to match borrowers, but the problem lies with the shadier operations.
For example, websites that promise to shop around competition may be selling your personal information to identity thieves and predatory lenders. So, be cautious about websites promising to save you time by comparing several lenders and terms. Beware of email communications from scammers – a lot of these emails contain a clickable link or button that requires you to confirm your personal information.
Clicking on these links can install viruses onto your computer or give scammers the information they need to steal your money. If you cannot trust a website, do not give your information. Instead, call the lender’s customer service department and get a second opinion.
#5. Asking if there is a physical address
A clear warning sign that you are in for a scam is a lender that does not have a physical address. To confirm that a company is legitimate, plug its address into Google Maps and see if it looks like a legitimate business. Many scammers will list P.O. Boxes and non-business addresses or even vacant lots as their business address. Many even have suspicious websites.
The most suspicious companies you will encounter cannot speak proper English, though they work with sales over the phone in America. Most financial institutions require their employees to speak in Standard American Dialect (SAD) to be well-understood by the majority of callers. Though this is not a steadfast rule, it is a good reason for a red flag to be raised.
#6. Ensure they meet your minimum standards
Be sure to read consumer reviews before you sign anything. The Community Reinvestment Act (www.federalreserve.gov/consumerscommunities) was designed to prevent predatory lending because it fosters competition among lenders. This act is particularly important for minority and poor neighborhoods, where lending can be especially predatory.
Historically, lenders have preyed on minority and poor neighborhoods, allowing them to be easily deceived. They did not know whether borrowers would be able to keep up with their payments or whether they would become unable to repay them after interest rates rise or housing prices fall. When this happens, many borrowers end up in debt.
Oftentimes, predatory lending happens on loans backed by collateral, such as a house or car. The lender can profit from the repossessed property, which means the lender is not only obtaining a loan but also getting money from repossession. Sometimes, predatory lenders try to entice borrowers by offering lower interest rates or greater loan amounts than they actually are.
However, these loans are difficult to repay and often carry exorbitant fees and high-interest rates. If you are unsure whether a loan is predatory or not, make sure to avoid any lender who offers you a loan without any documentation. Another type of predatory loan is payday loan. These loans are small in size and designed to be paid back on your next payday.
Although they are often convenient to use for emergency needs, they also come with outrageous interest rates. Some payday lenders charge as much as 950 percent APR, while a credit card with a higher interest rate would probably never charge more than 30 percent. In short, predatory loans are not for the faint of heart.
There are several ways to avoid scam loans. First, never agree to high-pressure sales tactics. Ask if there is an application fee and whether you will have to submit to a credit check. And do not accept a loan from a lender that is not registered. In the end, you will be better off avoiding these loan scams than you would have otherwise.