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Top 10 Warning Signs of a Predatory Lender and how you can avoid them

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At times, the borrowers find it hard to manage a difficult financial situation and tend to seek predatory lending services to solve the issues. It is quite devastating for subprime borrowers to seek home-asset based equity loans during a hard time. They have nothing to depend on the predatory lenders take advantage of this situation. 

Types of predatory lending

The prime concern of these predatory lending firms is to strip a substantial sum of money by following the practices mentioned below.

  • Deceptive marketing
  • No regards to the borrower’s capability of returning or repaying the loan amount.
  • Excessive insurance and fee premium
  • Higher-than-normal interest rates
  • Balloon payments
  • Prepayment penalties
  • Frequent financing or loan flipping

A majority of these cases go either unreported or missing as the victims do not find then being conned. As per Credit.org, only one case is registered for 100 such unchallenged cases. This statistic is quite worrying for the families.

10 telltale warning signs of predatory lending 

The biggest constraint in avoiding such situations is to recognize a predatory lender from the real ones. According to the best mortgage lenders in Utah, you can easily recognize such lenders waiting to prey on you by searching for the 10 signs mentioned below. 

  • Lacking substantial references

The honest mortgage lenders will definitely provide ample references to check on how they work and how much they are dedicated to a project. The first thing that you, as a borrower, must do is to seek proper references from the agency. It can also be a setup chalked by a fraud lending agency. It is hard to tell but if you meet them physically, you can always catch on a common practiced sign. Nevertheless, you can check out the online reviews posted by the families or previous clients. It can be done on the official website of the Better Business Bureau. Only the best mortgage lenders in Utah will have a substantial amount of testimonials speaking on their favor.

  • Steering to a particular lender

There is a fine line of difference between an agent trying to help and the one emphasizing you to seek a loan from a particular lender. If the agent is one of your kin or can be exceptionally trusted, you can go for a mortgage for building a home from his contact. If not then you must think twice to find out the reason for your agent’s constant pushing towards a particular lending agency. Agents get commissions for recommendations. They also enjoy incentives. Make sure that the intention is pure and honest.

  • Emphasized to make untrue statements

This is definitely a telltale sign that shows a discrepancy in the process followed by an agent or a lender. In order to understand the difference between flag-raising emphasis and helping intentions, you need to find out why the statements are untrue. Committing such mistakes will land you in a penalizing situation. For instance, exaggerating the income amount, employment history embellishment, alteration of down payment source fund sources or concealing debts that are still existing. 

  • Repeatedly persuaded to borrow money more than the original requirement

The contemporary economic climate is not as good as it should be. During this time, overleveraging might be the wrong decision. In most cases, the predatory lenders will persuade you to seek a higher amount than required. You might be planning for a particular amount to borrow but the agency is emphasizing to seek more based on the credibility of mortgage loans with low down payment. Avoid such actions and seek assistance from a reputed mortgage loan provider.

  • Your credibility

This is where you have to be judgmental about your present scenario. The reason for evaluating your present condition is to find out whether you are easy prey to such lenders or not. In this context, these lenders often target those with low-to-moderate income, bad credit history, excessive debt, aged seniors, and minorities. If you think that you belong to any of the above-mentioned categories, rethink before choosing a lender. Maintain absolute caution while choosing a mortgage lender and stay away from predators.

  • Improper disclosure

Every lending process must end with a proper disclosure from the client. Whether you are seeking a VA home mortgage or a home equity loan, you will need typical disclosures signifying the transactions specific to the state location and mortgage. For instance, you will need Truth in Lending (TIL), HUD-1 Settlement Statement, and Good Faith Estimate (GFE) for sure. There are other legal disclosures additional to those mentioned above that a lender must provide. If the disclosure segment is improper, you can be sure that the lender is following an unscrupulous approach.

  • No blank documents

One of the biggest reasons for worrying is families signing blank documents when forced or emphasized by the predatory lenders. There is no such requirement for blank document signing in a legit mortgage or lending transaction. Even if there is a blank portion or a page that you have to sign, strike out the empty region before you leave the documents in a file. 

  • Higher-than-normal interest rates

Encountering an elevated interest rate might be the effect of a bad credit score and other limitations. If there is no such obstacle, the lender might be doing it to gain commissions and quickly cover the closing cost. Take a look around and find out the rates offered by specific lenders with a good reputation to understand the situation.

  • Be honest

A subprime lender can provide you with a huge mortgage at a reasonable rate. Think twice before landing on the soup. Find out whether you can afford a mortgage that big. Acknowledge your limitations and back off immediately.

  • Feeling cornered

One of the prime feelings that tickle your brain and make you aware of danger is getting cornered. There is no pressure in making a reverse home mortgage decision. There are a few sales lines that predatory lenders use such as ‘your interest rate will not be there for the rest of your life’, ‘we have come very far’ or ‘you have already paid for appraisal’. 

Final words

Be ready for sudden surprises given by the common lenders willing to rip you off. Follow these 10 signs and get out of the transaction if you feel wrong. 

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