Abusive and predatory lending procedures strike at the very time when most individuals are emotionally vulnerable – during the purchase or refinance of a home or other property. Abusive loan practices can come in a variety of different forms, and they may not be immediately obvious to the person who is being tricked by them until it is too late. Making sure that you know some common abusive loan practices and how to fight them is an excellent way to protect yourself and to make sure that you do not fall victim to a scam or other fraudulent activity that will end with you losing money and the scammer getting away.
Abusive Loan Practices to be Aware Of
- One abusive loan practice is when lenders tell you that they are your only chance of being able to secure a loan because of your credit or for other reasons.
If you are told by a lender that you will not be able to get a loan from anyone else, or that you should not look around for other prices or loan options because there is not time and you need to act quickly, you should be aware that you are likely being scammed by an abusive lender. There are plenty of loan programs available for individuals with even poor credit, so there is no reason to not look around for your best offer in a case like this.
- Another abusive loan practice that is less common, but that does still occur, is the practice of charging higher interest rates or fees to individuals of different religious or ethnic backgrounds than would be charged to others.
For example, a black family wishing to purchase a house might be offered an interest rate of 7% by an abusive lender, where a white family with similar credit score and history is offered a much lower interest rate of 5%. If the interest rate seems high, or if you have heard of this type of activity taking place in the area where you are looking to buy a home, you will want to get several other opinions and make sure that you don’t take the first offer that is given to you if you are suspicious.
- Another abusive loan procedure is finding out that closing costs or terms are not what you initially agreed to or were promised when you began the financing process.
For example, if closing costs jump drastically after you have already had a good faith estimate provided to you, or if you are constantly being hit with additional fees and charges which seem suspect, you may be dealing with an abusive lender.
Getting Help
If you believe you are being treated unfairly or you notice any of these red flags, you will want to contact a real estate professional or an attorney to make sure you are not being scammed. Your attorney can protect your interests and review any documents before you sign so you can protect your hard-earned investment.
