How to Avoid Predatory Consumer Loans from Lenders

Avoid Predatory Consumer Loans from Lenders

There are regulatory bodies that are responsible for overseeing activities in the financial sector. They are there to make sure unscrupulous activities are not being carried out by financial institutions and their clients.

However, there are still loopholes in the financial sector. The unfortunate thing is how some (especially) financial service providers take undue advantage of these loopholes. It is therefore in your best interest that you do not lose your guard.

You need to understand the various ways these financial institutions can extort their clients and avoid falling victim. One of the ways this happens is through predatory loan packages.

This is one of the areas where you need to be very knowledgeable. To put things in perspective, you can get more information about how lenders cheat their borrowers here.

We will shed more light on this subject at large as we share some tips on how to avoid predatory consumer loans from lenders. We strongly advise that everyone keeps reading because of the relevance of this article.

What Is a Predatory Consumer Loan?

Avoid Predatory Consumer Loans from Lenders


This is a loan structured by the lender with the intent of extorting the borrowers. Desperate lenders as well as those who do not do their homework well often fall victim. In some situations, it gets so bad that the borrower ends up in a bad financial state because of how inconsiderate the terms of the loan are.

Borrowers need to make sure that they do not fall victim. This is why the details shared here should be taken seriously.

Some Helpful Tips on How to Avoid Predatory Consumer Loans

Avoid Predatory Consumer Loans from Lenders


For the record, it is not only consumer loans that can be predatory. Even business structured loans and several other options can be this way. However, we have gathered how people that take out consumer loans are oftentimes the victims.

The reason is that many of them do not make informed decisions and act in a hurry as stressed above. So, the first thing to do is to understand how the system works before taking a decision. In addition to this, listed and explained below are other things you should do:

No False Information

Avoid Predatory Consumer Loans from Lenders


Some lenders turn a blind eye to the use of false information. Some even advise you to do so in some cases. The false information may have to do with your income details and other documents.

To be candid, this is a red flag and you should not give in to it. Do not do business with such lenders. This is because they are very likely predatory in their approach.

They are so bent on ripping you off with high interest rates and other additional costs that they do not care about the basics. Just so you know, these kinds of financial service providers also present false information to you just as they are encouraging you to do the same.

So, you should avoid them at all costs and not give in to desperation. And truth be told, the right lender will be reasonably objective before approving your loan request. This is because they are transparent and committed to helping their clients have and maintain a good financial status.

No Omission

Avoid Predatory Consumer Loans from Lenders


Some paperwork needs to be filed before the loan is granted and you get the needed funds. It is only appropriate that every one of these paper works is detailed.

As a result, you should not be a signatory to official documents that have certain details missing. Unfortunately, some lenders stoop so low to the extent of taking advantage of their borrowers by using this tactic.

As annoying as it seems, this is a reality and the reason some people have fallen victim. So, you should not be a signatory to such documents. Furthermore, do not work with assumptions. This is because not every lender out there is committed to running their business ethically.

Fact-Checking Is Important

Avoid Predatory Consumer Loans from Lenders


You should not just take every word they say just as we rightly pointed out above. You need to go on a fact-finding mission.

You can start by seeking reviews. A good lender will have a long list of clients that will be happy to recommend them to others. This is because of how burden-free they have made servicing a loan.

Just so you know, many credible review platforms can be consulted for this purpose. Trustpilot and BBB (Better Business Bureau) are examples.

Furthermore, you must read the details of every document presented by the lender with an eagle eye. This is because some lenders can make promises and not have them reflected in the document. Unfortunately, the details of the document are what counts legally.

So, do not let anything in the document go unnoticed by you. This is very important if you will have success avoiding predatory consumer loans.

Work with the Right Loan Brokering Agent

Avoid Predatory Consumer Loans from Lenders


Practically speaking, it is possible to do all you need to do without engaging the services of a loan brokering agent. However, you are strongly advised to make use of their services.

This is because they can help you get the right consumer loan deal. Also, they are the best way to go about getting a refinancing loan as they can help you get billig (cheap) and borrower-friendly deals.

But despite all that they bring to the table, you need to tread with caution. This is because some brokering agents are unethically loyal to some lenders. They have a working relationship with some that could be to the disadvantage of their clients.

For instance, some lenders offer these brokers premium commissions if they can get clients to agree to an expensive and unfavorable deal. This is not to the advantage of the borrower and counts as a predatory tactic.

So, you also need to be careful when working with loan brokering agents for this reason and even more. While we recommend working with them, you are advised to consult credible review platforms to help you make informed decisions in this regard.

Be Extra Careful with Mortgage Loans

Avoid Predatory Consumer Loans from Lenders


Lenders can engage predatory tactics for any type of loan as explained above. However, the numbers indicate that this is more of the case with a certain type of consumer loan.

Here we are talking about mortgage loans. One of the reasons is the high demand for this type of loan. Many people are eager to leave their rented space and move into a place they can call theirs. This is even if they have to repay loans for as much as 30 years.

Also, the fact that there is security involved with this type of loan is enticing for some lenders. This means that they have something to hold on to if the borrower defaults.

Just so you know, there are various ways these lenders can take undue advantage of mortgage loan borrowers. Some of the ways include the following:

Asking that You Deed the Property Over to them

This often happens when you are having problems with your monthly payment. They then advise that you temporarily hand over the property’s deed to them as they help with refinancing.

This is usually a tactic to gain ownership of the home you have been trying so much to gain full equity over. So, you should not fall for this unfair trick.

Teaser Rates

Avoid Predatory Consumer Loans from Lenders


This is one of the most common tactics by these predatory-minded lenders. And just so you know, it is not only exclusive to lenders that offer mortgage loans.

The lender uses a low and borrower-friendly interest rate to attract clients. Some of them even paint the inconclusive but misleading picture that the introductory rate is the standard. Well, the borrowers begin to face the harsh music afterward.

On a Final Note

Not every financial institution that lends money is committed to its clients. Some of them are in it for profit alone and will do almost anything to make a huge profit. This includes ripping their clients off.

You need to understand certain things to avoid falling victim to such lenders and we have shed light on this here. We advise that you make good use of the details shared here. Also, make sure your loan brokering agent has your best interest at heart if you are using a broker.

Recommended Articles