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What is Predatory Lending? Predatory lenders take advantage of consumers by charging excessive fees, using deceptive practices and burdening consumers with debt they will never be able to repay. These lenders try to appeal to consumers who are new homebuyers, low-income or minorities, people who lack financial management skills, or those who have credit problems. Learning to recognize the signs of a predatory loan is important so as to avoid the consequences of this type of business practice. First you need to understand the difference between prime (A) and sub-prime (B/C) loans. Prime loans are the conventional loans you would get from a bank. They also include FHA and VA loans. Prime loans are for individuals with good credit who have established good credit ratings and who have the ability to repay the loan. Sub-prime loans allow lenders to loan money to those who pose a greater risk of not being able to repay the loan. Not all sub-prime lenders are bad. Some provide a good service to individuals who would not qualify for an A loan. However, predatory lenders target those who probably won’t be able to repay their loans with high fees and interest rates. This allows the lender to “steal” the equity you have put into your home. These borrowers run a high risk of foreclosure. The two links below can help you research more about predatory lending. · Warning Signs of Predatory Lenders · How to Protect Yourself from Predatory Lenders
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