How to Avoid Abusive and Illegal Lending
Abusive or “predatory” lenders target people in need of money. However, the loans they push typically have extremely high interest rates and fees. Often, they’re illegal. You need to know how to avoid abusive and illegal lending, or you’re at risk for paying too much, hurting your credit rating, and even losing your home. Here are some tips for how you can avoid predatory lending scams:
1. Know how to tell a good loan from a bad loan.
To be sure you know whether you’re being offered a good loan or a bad loan, there are a few questions you must ask yourself:
Do you feel pressured? A sign of a bad loan is getting harassing phone calls or solicitations from lenders who say they can give you next-day approval. The same applies to lenders who offer “guaranteed” low-interest loans, as long as you apply over the phone and pay them money that day.
Have you shopped around for the best deal? Be sure to check with other lenders, including with us at Tennessee State Bank, for rates and total costs. Then compare the interest rates and the total costs for your loan with those of other lenders, and beware of high up-front fees and percentage points.
Does it sound too good to be true? Keep an eye out for telemarketers, TV ads, or door-to-door salespeople who offer easy or quick-approval loans for houses, cars, or home repair, but do not disclose the details. Be sure to read the fine print to confirm what you’re being offered is what you’re actually getting. You also want to avoid lenders who tell you bad or no credit is not a problem. Trustworthy lenders don’t do business that way.
Can you trust the lender? Don’t just rely on the lender’s word. Get references and check them out before doing business with them. Call your local Better Business Bureau to see if there have been any complaints about the lenders you are considering.
Do you understand the loan terms? Before you start borrowing, be sure you know exactly what you’re getting and what you’re paying. Ask the lender to explain any fees, terms, or conditions that you don’t understand, and never sign a blank form. Make sure what you’re signing is what you agreed to verbally, and don’t sign anything that doesn’t agree with what the salesperson was offering.
2. Consider if prepaying for credit life insurance is the best option.
Prepaying for credit life insurance will protect your family by paying off the loan if you get sick or die. However, paying it upfront can add to the monthly cost of your loan.
3. Think twice about a loan with a large amount due at the end of scheduled payments.
If your loan has a high amount due at the end of the scheduled payments, this final payment could be beyond your ability to repay.
4. Watch out for lenders who tell you not to worry if you can’t pay your mortgage.
Some lenders will tell you that they’ll help you refinance your loan if you need to. Predatory lenders make money from the high fees and closing costs you’ll be charged to refinance the loan that they knew you couldn’t afford to repay in the first place.
5. Never sign a loan contract without knowing all the facts.
Make sure that you understand every part of the contract that you’re signing. Ask for advice from someone you trust, whether it’s a family member or a banker at Tennessee State Bank. You can also call a local nonprofit credit counseling agency for free help.
Report abusive lenders.
If you have been a victim of lending abuse, it’s important to let others know. Your complaint can help prevent others from being victims too. Report your experience to the Federal Trade Commission. You can call them at 1-877-FTC-HELP or go to https://www.ftc.gov/ to file a complaint online.
Get a loan from someone you can trust.
Tennessee State Bank is now offering a simplified process for unsecured consumer loans, exclusively to TSB checking and savings account customers. You will receive a response within minutes. Loan is based on your deposit relationship and credit information; no additional proof of income required. Loans range from $1,000 to $30,000. Stop in and speak to a lender or customer service representative for more details.
About Tennessee State Bank
Tennessee State Bank has been serving our local community for over 48 years. With branches in Sevier County, Knox County, Cocke County, and Jefferson County, we offer convenient banking services in East Tennessee. Whether you’re looking to open a checking account, obtain an auto loan, or apply for a home mortgage, we make the process as simple and straightforward as possible. Tennessee State Bank’s motto is “Banking at its Best!”SM, and we strive to live up to that creed every day. Let us know how we can help you by sending us a message via our Contact Form.
Tennessee State Bank is Member FDIC and an Equal Housing Lender.
“Avoiding Predatory Lending Scams.” American Bankers Association, https://www.aba.com/advocacy/community-programs/consumer-resources/protect-your-money/avoid-predatory-lending-scams