Predatory lending:
What does it mean for you?

The practice of predatory lending has been around for quite some time now. Although there are many laws against predatory lending, this practice still exists until this day. Predatory lending is often defined as the practice of lending money to borrowers with unfair or rather predatory terms of agreements. In modern banking, there are several aspects considered unfair or predatory. In this article, we will discuss what some of those aspects are.

The first one, probably the most unnoticed one, is failure to announce that price structure can be negotiated. Borrowers have the right to negotiate price structure, such as interest rate and fees. However, most modern banks usually disclose this detailed information and seldom announce that it is negotiable. They will negotiate only if the borrower insists on negotiating, and this is clearly a form of predatory lending.

Credit insurance is another form of unfairness in modern banking. Every borrower must pay a certain amount of money, quite substantial actually, for credit insurance. Should borrower died, the bank will get insurance coverage and borrower’s family will not be held responsible. This insurance fee, often unknown to borrowers, is another form of predatory lending happening in our very own modern banking system. The insurance fee is actually higher since you are not submitting any medical records, which the bank/lender did not ask for.

Even determining interest rates and fees based on risks is considered a form of predatory lending. It is a vicious circle: if you have bad debts, you must pay high interest, which means you will soon be in huge debts that you are unable to pay and you will have bad debts. Get the picture? Banks are charging more to those who already have bad debts by using risk as a shield for predatory lending. Predatory lending makes the whole banking system not make any clear sense at all.

Although a lot of people think these kinds of practices have to stop, there is no way to stop them. It has become a system, our modern banking system with predatory lending and unfairness sitting in the middle of it. Banking system is great, but they need to stop predatory lending practices and start putting more care to their customers, especially borrowers.

The best way to avoid such predatory lending is to be extra careful when lending money from lenders. Check and re-check everything and keep objective reasons so that you can avoid predatory lending.

Get a free consultation about predatory lending with a loan modification specialist.