Spotting Predatory Lenders

As foreclosures increase in America, a new breed of criminal is on the rise - the predatory lender. Predatory lenders target specific groups; the elderly, immigrants, and people struggling to pay bills are all at risk.

When dealing with any lender, there are some red flags that may indicate you are dealing with a predatory lender:
  • They may ask you to falsify information on loan documents.
  • Avoid lenders that attempt to get you to borrow more than you need.
  • Predatory lenders will try to get you to accept payments you cannot make.
  • The lender will fail to provide loan disclosures, or ask that you not read them.
  • The lender will ask you to sign forms, and tell you he will fill them out later.
  • The predatory lender will tell you one set of terms when you apply, and then present another set of forms with no explanation.
  • These lenders are reluctant to give you copies of forms you have signed.
  • Predatory lenders will often misrepresent the type of credit you are given i.e. offering you a line of credit, when you are actually getting a one-time loan.

People seek loans for a variety of reasons; home equity, bill consolidation, or you just need to stave off foreclosure. With any loan, be very leery of sales pitches that promise you financial relief even if you have no job, are behind in your bills, and have failure to pay. They will give you a loan with unacceptable payments, and then foreclose on your home. Always avoid signing any form with blank spaces, which can be filled in later, allowing the predatory lender to make changes against your approval. Avoid any lender that charges a high application fee. Be sure you understand everything on any form before you agree to sign.

The elderly are especially susceptible to subprime lenders. They generally have high equity in their homes, and are usually living on a fixed income. The typical subprime lender is a person who provides credit to those with past credit problems. These predators market to people with "B" and "C" credit ratings. Although subprime lending is a good for the market, it is often seen as a predatory tactic.

Remember, predatory lenders are looking for people with an inability, not ability, to pay. Always insure you are not falling into these traps set by predators. Counseling on credit and loans is always available. Seek guidance from friends or neighbors who have had experience with them. In addition, many local housing departments offer assistance and guidance on borrowing.