Predatory Lending: Why You Need Legal Help If You’re a Victim
Predatory lending, as the name suggests, is used by lenders to target loan customers in applying for financing when they need money quickly, or must pay for an emergency. You’re basically taking out a loan under duress. Therefore, victims of predatory lenders often sign contracts with exorbitant interest rates and fees. However, they often cannot pay back the proceeds because the amount is both extortionary and unfair. To better understand how predatory lending works, it helps to further define the activity.
What Is Predatory Lending?
Investopedia defines preparatory lending as a practice where a lender uses deceptive or fraudulent tactics when lending out money. As noted, the lender deceives borrowers by taking out a loan they cannot reasonably pay back. These loans carry high-interest rates and fees, placing a borrower in a precarious position with his or her credit. The tactics are devised to primarily benefit the lender financially.
Keep Up-to-Date about Predatory Loan Practices
The U.S. Department of Justice recommends that lenders get legal help and learn all they can about predatory lending practices. An educated consumer is a predatory lender’s worst nightmare.
How Predatory Lenders Coax Mortgage Customers
Predatory lending may take various forms. In the case of mortgage financing, the lender may use the following tactics.
- Aggressive solicitations are often used by unscrupulous lenders to sell loan products. Shop for loans yourselves. Beware of anyone selling financing to you.
- Pressuring homeowners to refinance their homes is often done through loan flipping. Never refinance your property if the interest rate for the refinance is higher.
- High fees, of course, are a trademark activity of predatory lenders. If the fees are over 5% of the loan amount, beware! That is too much to ask.
- Lending money for property taxes is another predatory lending practice. Make sure you escrow, or set aside money each month to pay for your property taxes.
- Loans with low monthly payments but a balloon payment at the end of a loan period are often solicited by predatory lenders. The borrower, however, faces a problem at the end of the loan term when they cannot meet the payment. In this case, they often need to refinance at a much higher rate.
The whole idea behind predatory lending is to induce the borrower to take out a loan that he or she really has no chance of repaying. Again, it’s the lender who reaps the biggest financial rewards through setting fees and interest at high-than-equitable amounts.
Investigate any Financing that Sounds Too Good to Be True
Speak to an experienced attorney if you feel you have been unfairly targeted by a predatory lender. Remember, if something sounds too good to be true, it’s usually not true. A predatory lender is a salesperson who sells hype but does not provide clear-cut answers.
Demand an Explanation
If you cannot get your questions answered or a loan is confusing, you have the right to demand an explanation. A lawyer can help you make sure you don’t fall victim to this type of practice and that you receive remediation if you do.
He or she can go over contracts, ensuring you don’t sign anything that puts you in financial jeopardy. If a lender has already fooled you into signing, what you consider, to be a questionable loan, a lawyer can assist you in resolving the matter permanently.
Watch Out for the Bait and Switch
Predatory lenders like to trap a borrower, using a bait and switch approach. That is why you should fully understand what you are signing. Fully read a loan agreement first, going over the document with a knowledgeable attorney.
Who Do Predatory Lenders Target?
A predatory lender often dupes people who are economically poor or who are in a desperate situation financially. Even if you feel you need money, don’t take out a loan out of desperation.
The predatory lender likes to direct financing products toward people who may need quick cash for medical emergencies or who may be underemployed, recently laid off or jobless. Often, these people find it tough, if not impossible, to get financed conventionally.
It Never Hurts to Speak to a Lawyer
You can’t go wrong by speaking to a lawyer, whether you want to take out a loan or you feel you have been dealt an unfair hand when it comes to financing. In either case, you can find an equitable recourse that will make it easier for you to survive personally and financially.
Make sure you have all the facts and that everything is clear. An attorney can help you see things so you better understand your options and rights legally.
Who to Call about Predatory Lending in the LA Area
Do you feel you have been victimized through a predatory lending scheme? If so, take time now to make an appointment to discuss your situation. In the Los Angeles area, call Jance M. Weberman, a Professional Law Corporation. Contact the firm at 213-386-9100 now.