About Predatory Lending

Posted by on Jan 15, 2016 in Cash & Loans, Mortgages Loans, Payday

About Predatory Lending

     Predatory lending is more extreme form of payday lending in which lenders use deceptive actions in order to give loans with interest rates that are too high, or to input other illegal parameters in payday loan creation process. A lot of those things they do is against the law, but those practices are still present. Most common example of predatory lending is introduction of collateral (car, house or other property ) if a borrower fails to repay that loan. Lenders that practice predatory lending will deceive borrowers with different interest rates ( they will give different interest rates on paper, if there is any, and in their negotiations with the borrower ) or they will convince the borrower of his ability to repay those loans in time, which of course leads to seizing of property which is the main goal of those lenders.

    I will give you a list of abuse and unfair lending practices that are considered as predatory lending:

    • Lenders will increase interest rate in return for extension of repayment time of borrowers that they consider as high risk individuals. It is also common to give higher interest rates to high risk people, which some consider as fair and legal practice. Whole lending industry, both legal and illegal consider this practice as fair, because high risk individuals pose higher risk of not returning their loans.
  • slide0032_image005Lenders use single premium insurance on their loans to secure their investments. This is done to secure loans if a person that took them dies. These loans are in most cases illegal, and customers have no insight in all details of that insurance. That is why this insurance is incorporated into the loan, raising repayment size of the same.
  • Lenders will not inform their borrowers about negotiable loan prices. Borrowers don’t know that they can negotiate the size of the loan they take, or the repayment period. They will try and convince future borrowers that conditions they have given are in their best interest. But in fact many lenders when faced with customers that do understand these things will be open to negotiations that involve size of the loan and repayment period as well. And different repayment period can lead to different interest rates, another thing that lenders hide from their borrowers.
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      Borrowers that are unsophisticated and those than don’t have any insight in documents will more than often get cheated. Lenders will avoid disclosure of all conditions and terms of the deal, and some will even alter certain aspects of the deal, as long as they can keep those alteration out of the borrower’s sight.

  • Some payday lenders use desperation of their borrowers to raise interest rates beyond usual percentage. They will also make a list of additional fictional risks that will raise interest rate even higher, or they can list those additions as other types of fees.
  •    Many payday lenders will do anything to increase their income from repayment of their loans. They will try to deceive you, and present the loan as borrower friendly, which is far from true.

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