Usually predatory lenders target people who are strapped for cash, but the loans they push have sky-high interest rates and fees that are illegal.
Janise Bonds was looking for a home equity loan. She needed $26,000 to pay off some credit card debt. She called a company after reading its flier she got in the mail offering a low-interest loan.
She said the loan officer told her poor credit was no problem, but when the paperwork was done she ended up with a 17 percent interest rate and payments she couldn't afford.
"Now I have to deal with it. I've got to figure out how to get myself out of this situation because I don't want to lose my house. I kind of like my house," Bonds said.
"What we're seeing right now are families who have built up substantial equity in their homes, taking on debt that neither they can afford nor can they sustain over time," said Ellen Lazar of the Neighborhood Reinvestment Corp.
Predatory lenders often target borrowers who are down-and-out financially and the elderly. Some may not even realize that they are putting their homes on the line as collateral.
Here are some tips to protect you from predatory lenders:
First, be careful of telemarketers or door-to-door sales people who contact you out of the blue, offering bargain loans and claiming that your bad credit or lack of credit is no problem. Legitimate lenders don't operate this way. Also, don't act under pressure.
Second, be especially leery of telephone lenders who offer next-day approval or guaranteed, low-interest loans if you'll apply over the phone and pay them money that day.
"If you are in a desperate situation, don't take desperate measures. Make sure you're still doing your homework," said James Ballentine, of the American Bankers Association.
By the time Bonds is done paying off her $26,000 loan it will cost her $90,000.
For many people, instead of providing help, these loans can put you in financial trouble.
Predatory Lending MBAA.org HUD on Loan Fraud ResponsibleLending.org Office of Banks and Real Estate AARP.org Distributed by Internet Broadcasting Systems, Inc. This material may not be published, broadcast, rewritten or redistributed.
