How to Get a Loan Without Getting Fleeced

While it would be nice if people could save up the money that they need for the things they buy, most of us must get a loan for big-ticket purchases and financial emergencies. In too many cases, money and deceitful actions go hand-in-hand. So, how can you get a loan without getting fleeced? You can do so by completing research, using caution and seeking trustworthy sources.

How to Avoid Getting Fleeced When Applying for a Loan

To get a loan without getting fleeced, it’s important to do your research. While financial emergencies may make it tough to complete in-depth research, consider asking family members or friends for recommendations. At the very least, do a quick Google search of a lender before getting a loan.

What You Should Know About Predatory Lending

According to Debt.org, predatory lending is a lending situation that enacts unjust or abusive loan terms against you. Lawmakers also consider predatory lending any practice that convinces you to accept terms that are unjust through deceitful, coercive, devious or exploitative actions to get a loan.

They may hide or falsify the true cost of the loan, its risks or even its terms. In some cases, dodgy lenders change the loan terms after making you an offer. Risk-based pricing is another way that a lender may attempt to prey on you. In this situation, the lender attaches interest rates to your credit history, so if you’re a high-risk borrower, then you may be charged more because of it.

Loan packing is also considered a predatory practice. It involves convincing you to add unnecessary products to your loan. For instance, the lender may convince you to buy credit insurance, which pays off the loan if you die. It also increases the cost of your loan.

Predatory lenders fleece borrowers through inflated fees and charges. They may charge you more than reputable lenders for appraisals, document preparation and closing costs. These types of lenders may also encourage you to refinance a current loan into a larger one that comes with a higher interest rate and more fees.

Are Predatory Lenders Likely to Target You?

Predatory lenders usually go after the poor, minorities, the elderly and those who are less educated. They also target people who need money immediately for emergencies like car repairs, medical treatments or dire home expenses like a furnace repair or a new hot water heater. Predatory lenders target people who have no or poor credit and those who are recently out of work because these situations generally disqualify them from getting a loan that features traditional terms.

Make Sure that Your Lender is Licensed

To get a short-term loan without getting fleeced, ask about a license. According to The Huffington Post, states that permit alternate lending offer licenses. This allows lenders to become certified as a direct lender of short-term loans. Once lenders become licensed, they must comply by the laws within the state. If they fail to do so, then the state will revoke their license.

By obtaining a loan from a licensed lender, you’ll have some protection from the state should something go wrong with the repayment terms. If a loan service is shady, then it will be operating without a license or from a location outside of the country. This allows them to sidestep the rules and regulations established by any state. Avoid getting a loan from these service providers because if you borrow money from one of them, you will be doing so unprotected.

Do Not Send Money to a Lender Before Obtaining a Loan

When you need to get a loan, lenders will not require money in advance. Everyone knows to avoid the sort of scam involving a large sum of inheritance, one that requires a few hundred dollars to release, but with disreputable lenders, a request for funds may seem credible. The reason for this is that they may tell you the funds are to cover the application cost or taxes. Lenders should not be charging you to process a loan. If one attempts to, then the lender is illegitimate. When lenders are the real deal, they’ll add the fees to your payment.

Read the Terms and Conditions to Search for Hidden Fees

Before signing the loan papers, read the terms and conditions. When you take the extra time to do so, you’ll be able to spot any hidden fees. Predatory lending companies use this tactic to fleece unsuspecting and desperate borrowers. Most states have a maximum fee amount that lenders can charge for every $100 borrowed. Don’t get a loan without checking what that fee amount is in your state. By knowing your state’s fee limits, you can avoid paying more than you should.

Check Your Potential Lender’s Contact Information

Don’t get a loan through a lender you have trouble reaching. Make sure that the company’s contact information is accurate. When you’re working with a lender, it’s important to be able to reach a customer service representative over the phone. In fact, consider borrowing through lenders that have a local physical address. This allows you to talk to a representative of the company in person. You can also make sure that your lender is based in the U.S. by checking the physical address. Companies that are located in the country are subject to U.S. rules and regulations. Avoid lenders that only give you an email address as a way to contact them.

Don’t Get a Loan Without Checking the BBB Rating

Don’t get a loan until you’ve contacted the Better Business Bureau, or BBB, about the lender’s rating. Through this organization, you can locate information about the lender. The BBB will tell you whether a lender has past violations, the number of consumer complaints received against it and how the lender dealt with complaints.

The bureau will also give you an overall performance rating for the company. If the BBB doesn’t have a record of the lender, it’s possible that no complaints or issues have ever been reported. However, a lack of information could also indicate that the company isn’t registered in the U.S.

Offering to Lend You More than You can Afford

Bankrate reports that if you’re in the process of obtaining a loan and the lender offers you more than you can comfortably afford to repay, then you’ve come across a predatory lender. Also, back out of loans when lenders ask you to make false statements on your loan papers or if the loan officer wants you to sign blank pages.

With A Little Extra Effort, You Can Avoid Lending Scams

Along with listening to your gut when it comes to obtaining a loan, be sure to check a lender’s license and BBB report as well as the terms and conditions. Confirm the location of each of your lenders, and avoid the ones that want you to send them money before the loan is issued. A little extra effort on your part will help you avoid lending scams.

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