Predatory Lending Is Not Just About High Interest Rates
The first thing that comes to mind when most consumers think of predatory lending is payday loans, since those loans have astronomically high interest rates, and they typically advertise to consumers who have no other access to credit; many borrowers of payday loans do not even have bank accounts, and qualifying for a credit card is far out of their reach. Predatory lending is not just about high interest rates or about capitalizing on consumers’ lack of options, though. Risky loans that are easy to qualify for, from payday loans to buy now pay later (BNPL) have remained popular for years. Consumers choose to engage these services because they decide that the benefit of having money or credit in the short-term outweighs the risk of being unable to repay it later. A Miami debt lawyer can help you avoid getting mixed up with predatory loans and can help you get out of debt if predatory loans have made your financial problems worse.
Loans That Will Become Unaffordable Unless the Borrower’s Financial Situation Improves Quickly
Some of the most financially damaging loans do not become unaffordable immediately. In fact, borrowers might even be able to make the first few installment payments easily, and they might even begin to feel confident that they will be able to pay off the loan earlier than its maturity date. Balloon payments and adjustable interest rates are a common feature of predatory loans. In some cases, the terms of the loan are worded in a misleading way, or they are difficult to find on the website where the borrower submits the loan application. You can avoid these kinds of problems if you carefully review the terms of the loan before you agree to borrow, but bait and switch lending practices are even worse. In this case, the borrower agrees to the loan on fair conditions, but soon after the parties sign the agreement and the borrower receives the money, the lender sells the loan to another lender, and the new lender imposes terms that quickly put the borrower in a tight spot financially.
Pressuring Borrowers Into Paying for Services They Don’t Need
Another predatory tactic that lenders sometimes use is adding on fees that serve no useful purpose to the borrower. The lender might falsely claim that the services that the borrower is getting for these additional charges, such as insurance or administrative fees, are necessary or inseparable from the loan. They might even add the additional fees surreptitiously and hope that the borrower does not notice. If you are meeting face to face or talking on the phone with a representative of the lender, it is a good idea to ask about every single item of the loan agreement, especially if the payments are higher than what the lender originally quoted you.
Contact a Debt Lawyer About Steering Clear of Predatory Loans
A South Florida debt lawyer can help you free yourself from the financial hardship caused by predatory loans. Contact Nowack & Olson, PLLC in Miami, Florida to discuss your case.