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    A Guide to Predatory Loans

    Predatory lending is a term that refers to the use of deceptive or manipulative tactics to cajole a borrower into accepting a loan that carries excessive or unfair rates, fees, or other unfavorable terms. These lending practices are designed to benefit the lender at the expense of the borrower. While this term rose to prominence during the subprime mortgage crisis in 2008, it can refer to all types of lending practices and loans, whether it involves mortgage loans, auto loans, personal loans, or payday loans. There is debate as to what constitutes predatory lending, but there are common telltale signs to look out for and hints to avoid falling into potentially life-altering traps. With that in mind, here is a guide to predatory loans.

    While subprime borrowers may find themselves targeted by predatory lenders, the truth is anyone can fall victim to these lending practices, especially vulnerable and low-income individuals who have few resources and lower credit scores. It stands to reason that people with precarious financial circumstances are prime targets for such bait-and-switch schemes. This is particularly true when crises or unforeseen situations arise, and you need to secure cash quickly. Those who are in dire financial straits may not feel they have any other option when money is a priority, and they are not eligible candidates for other funding sources. As such, consider this overview of predatory loans and how they can impact you as well as your loved ones and financial future.

    Borrower Beware

    This well-known philosophy applies to borrowers and buyers alike, or at least it should. If a lending offer appears too good to be true, there is likely a catch. Before signing any loan agreement, it is crucial that you read over the entire document and fully understand the payment terms. You should compile a list of questions and concerns that need to be addressed before agreeing to or signing anything. If the lender is hesitant to answer your questions or address your concerns, consider that a significant red flag. It might be worthwhile to consult an attorney or legal aid for assistance to ensure you fully understand the terms and possible fallout if something goes wrong. Lending practices of this nature often require collateral, such as property, a vehicle, or other assets of value, that can be used to secure the loan. That way, if you default on the agreement, the lender can cease or repossess the collateral used, which limits their risk and often nets a profit for the lender.

    Moreover, these types of loans usually come with high-interest rates and unnecessary fees, which are part of the price of convenience for services rendered. However, if you opt to enter into such an agreement, you should do so with your eyes wide open and fully aware of the payment terms as well as the possible ramifications. Thus, you can avoid exacerbation of your financial dilemma, incurring additional debt, being forced to give up your assets, and placing your financial future in jeopardy.

    predatory loans
    Predatory loans

    Cost Transparency

    If you cannot ascertain the actual cost of the loan, something is not kosher. A lender that is customer-centric and follows proper procedures will be transparent about the total cost of the loan as well as its services. Meaning, you should be able to peruse their website or visit their physical location and easily find all the costs associated with the desired funding option, which includes a clear breakdown of all fees, penalties, and other related charges. By law, lenders must state a financial product’s annual percentage rate, or APR, which combines the interest rate and upfront fees. If product details are omitted or buried in the fine print, the lender is reluctant to provide full disclosure and attempt to manipulate the situation. This is a sign the company is not reputable, and it should be a dealbreaker.

    Credit Checks Suggest Credibility

    If a lender approves your loan application without verifying your credit history or financial resources, it is likely a predatory loan scenario. Without this information, the provider cannot assess how you have managed past debt or gauge the potential fallout of accruing more debt. Predatory lenders account for this risk by leveling high upfront fees, elevated APRs, and extraneous charges into the structure of the loans they offer. These higher rates could be 2-3 times larger than standard, and the additional costs may impede the borrower’s ability to pay back the loan within the given payment terms.

    Watch Out for Balloon Payments or Lump-Sum Payment Structures

    Another telltale sign of predatory loan providers is the use of balloon payments or lump-sum payment structures. This deceptive practice is common among mortgage lenders. It involves structuring the loan so that your payments are initially low, but then a significant final payment is due at the end of the mortgage. These large, closing sums are referred to as balloon or lump-sum payments, and they are a hallmark of manipulative providers.

    Negative Amortization Is a Big No-No

    This predatory payment structure involves setting the borrower’s monthly payment below the interest cost, which results in the remaining interest cost being applied to your principal loan balance. With this payment structure in place, your loan balance only continues to grow, and subsequently, you are incurring more debt every month.

    Predatory loans are structured to entice borrowers to accept unfavorable payment terms whereby the lender extracts more money from the borrower than owed via excessive or unfair rates, fees, or other unfavorable terms. These lending practices are designed to reduce the lender’s risk and profit margin at the expense of the borrower. The main takeaway regarding this topic is that potential borrowers should always do their research, explore their options, and read the fine print, so they are fully informed before signing on the dotted line.

    This article was brought to you by TFC Title Loans, we try to bring to you the most informative information. If you are interested in getting a title loan local to you, we are able to help you with our large referral network.

    We will help you to get the most money by using the equity that you have in your vehicle, the application is fast and we can provide you with same-day funding.

    All of our referral partners are in compliance with the CFPB. We will help you to get the money that you need but from a trusted and reliable title lender.

    Disclosures

    DISCLAIMER: As our policy to make sure you know what we do and what are our limitations, we offer you these disclaimers. We are NOT A LENDER and we do not make short term cash loans or credit decisions. We are a referral service and work only with licensed lenders/brokers.

    We may act as the broker for the loan and may not be the direct lender. Loan proceeds are intended primarily for personal, family and household purposes. We do not offer or service student loans.

    *Loan amounts by the lenders vary based on your vehicle and your ability to repay the loan.

    *Since we do not lend money directly we cannot offer you a solicitation for a loan, except in the state of California. In all other serviced states we WILL match you with a lender based on the information you provide on this website. We will not charge you for this service and our service is not available in all states. States that are serviced by this Web Site may change from time to time and without notice. Personal Unsecured Loans and Auto Title Loans are not available in all states and all areas.

    *Auto Title Loan companies typically do not have pre-payment penalties, but we cannot guarantee that every lender meets this standard. Small Business Loans typically do have pre-payment penalties and occasionally will use your car as collateral to secure the loan.

    *All lenders are responsible for their own interest rates and payment terms. TFC Title Loans has no control over these rates or payments. Use of the work competitive or reasonable does not mean affordable and borrowers should use their own discretion when working directly with the lender.

    *The amount of people who applied for a loan and we helped and those who received a loan is not the same. We cannot guarantee we will find a lender who will fund you.Just because you give us information on this web site, in no way do we guarantee you will be approved for a car title loan or any other type of loan. Not all lenders can provide loan amounts you may see on this web site because loan amounts are limited by state law and/or the lender. Some lenders may require you to use a GPS locator device on your car, active all the time. They may or may not pay for this or charge you for this. This is up to the lender and we have no control over this policy of the lender. Typically larger loans or higher risk loans use a GPS.

    *In some circumstances faxing may be required. Use of your cell phone to receive updates is optional.

    *Car Title Loans are expensive and you may have other ways to get funding that is less expensive. These types of loans are meant to provide you with short term financing to solve immediate cash needs and should not be considered a long term solution. Residents of some states may not be eligible for a loan. Rejections for loans are not disclosed to our firm and you may want to contact the lender directly.

    *Car Title Loan lenders are usually licensed by the State in which you reside. You should consult directly with these regulatory agencies to make sure your lender is licensed and in compliance. These agencies are there to protect you and we advise making sure any lender you receive money from is fully licensed.

    *Trading Financial Credit, LLC dba TFC Title Loans, Car Title Loans California, Dineromax. If you are using a screen reader and are having problems using this website, please give us a call at 1-844-242-3543 for immediate assistance.

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