Predatory lending is the unethical act of imposing unfair loan terms on a borrower through coercive, misleading, or deceitful practices. Unfortunately, lenders throughout the US have been using predatory lending tactics to trick innocent homeowners into disadvantageous loan agreements. Due to the risky and even deceptive terms of these loans, victims are unable to make loan payments and many face the threat of foreclosure . According to Pew Charitable Trust, about 12 million Americans fall into this debt-trap every year.
How do you know if you are the victim of a predatory lending scheme? Here are some common practices that should serve as warning signs of a faulty loan:
Predatory lending is often characterized by excessive fees hidden in fine print. Appraisal costs, closing fees, and document preparation fees are much higher than reputable lenders would charge.
Aggressive Loan Offers
Many predatory lenders operate by sending mail, making telephone calls, and knocking on the doors of potential targets. Look out for these types of solicitations. Licensed and reputable lenders do not typically operate this way.
The lender gives you a different type of loan or interest rate than you originally agreed to. Sometimes an unreasonably high interest rate will start months into the loan payment without justifiable cause or fair notice.
Predatory lenders are known to add mandatory, unnecessary products (such as credit insurance) into the cost of the loan. Beware of these types of add-ons to avoid paying for unwanted items.
Balloon mortgages have low payments upfront and very high (balloon) payments later in the loan. Lenders may convince a homeowner into this type of loan, so that when the balloon payments are not met, the lender will make additional money off the borrower with another high-fee loan.
Although extremely low monthly payments may seem favorable at first, they could cause you to owe much more money in the long run. When a monthly loan payment is too small to cover the interest, the remaining interest is added into the unpaid balance. Overtime, the accumulation of the unpaid interest will make the original projected debt substantially larger.
The best way to avoid predatory loans is to educate yourself about their deceptive practices. Don’t rush into anything, understand your credit report, and never sign anything with blank spaces. If you’re unsure if a loan document is legitimate or has fair terms, it’s advisable to have it checked by a trusted lawyer. Whether you already may be a victim of predatory lending or are seeking help to avoid it, a Miami foreclosure attorney can help. Call the experts in Miami foreclosure defense at Graham Legal for a free consultation today.