An Insight Into Predatory Lending
With the ever increasing rate of foreclosure the new buzzword in the industry is predatory lending. In fact, predatory lending is being considered one of the primary reasons for such a high rate of delinquencies leading to foreclosure. There are many homeowners who are not aware of this type of lending. This article will throw light on predatory lending and how you can save your self from falling prey to predatory lending.
Defining Predatory Lending
Predatory lending has not been properly defined by federal laws while different states have their own definition for abusive lending. The problem is that practices like predatory lending will strip off the equity from the homeowner. Predatory lending practices include:
Repeated refinance of a loan especially within very short periods of time and for every refinance, high fees is charged.
This involves Packaging a mortgage with single premium credit insurance products. The products can include credit life insurance but the greatest drawback is that the borrower will not be intimated about various important costs like that of inclusion or additional fees that might be associated with the credit life insurance.
Excessively high fees and rates are charged to the borrower even if they qualify for lower rates.
As a homebuyer, the best defense you can have against predatory lending is information and knowledge. The more information you have, the more aware you will be against the unfair lending practices. Here are some pointers that you might find informative and will definitely help you against all kinds of unfair lending practices. Here are some of the things that you can do:
1. If you come across a loan that offers an unbelievably low interest rate then disregard it or avoid it completely. It is just another tactic or marketing gimmick for roping in unaware borrowers.
2. Always do your homework or research. This will help you to understand the different types of loans available in the market, their interest rates and never forget to check the reputation of the loan company before making a decision. Only when you compare two different loans, you will be able to differentiate between a good loan and a bad loan.
3. Get your facts right and try to understand your loan terms and also try to get comparisons for the APR (annual percentage rate) on different loans from different lenders.
4. Call up different lending institutions and find more information regarding prepayment penalties.
5. Always double check documents before signing. Read everything and pay special attention to anything that is written at the bottom and in fine print. You need to be cautious of those lenders who promise that any error will be fixed later on.
6. Ask questions and especially about the different types of fee you have to pay.
7. It is always safer to work with a credit counselor.
8. At all costs, protect your home equity.
9. The bottom line is that if you are unsure about anything at all, then don’t go ahead with the deal.
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