When your credit is lacking, whether from past mistakes or not enough history, you may be willing to accept whatever loans you can get. This mentality can lead you to fall victim to predatory lending practices.
Predatory lending is exactly what it sounds like: lenders who prey upon borrowers through unfair, expensive loans. You can take preventive measures to ensure you do not become involved in predatory loans.
You may want to go with the first option you find or lender willing to help you, but take your time and do your homework. This is a decision that requires care to protect your financial future. Research each business and ask lots of questions. Confusing answers may be a sign that the lender wants to keep you in the dark.
Watch out for warning signs
Watch out for any of these red flags as you uncover information and interact with employees:
- Easy qualification: Acquiring a loan is not easy when you have poor credit, as it makes you high risk. If your history is not making the lender hesitant to give you money, then be wary.
- High fees and interest rates: The reason qualification may be easy is that the lender plans on regaining the money through abnormally high fees and interest rates. These costs are more likely to keep you in long-term debt.
- Oral promises: Lenders may say exactly what you want to hear to make you feel comfortable taking the loan. However, ensure that everything they say matches the written paperwork before you sign the documents.
- Shady practices: You should leave if the person helping you asks you to lie on the paperwork or enters your information incorrectly on purpose.
Listen to your instincts, and remember that anything too good to be true usually is.
No one can force you to do anything you do not want to do. If at any time you feel uncomfortable, you can change your mind, say no and walk away.