Bad credit lenders are lending organizations that are willing to extend a loan to persons with bad credit. Traditionally, most lending institutions will not issue a loan to persons whose credit score is below a certain amount, or who show a history of defaulting on loans. However, in recent years, bad credit lending has become more common.
Bad credit lending mainly aims to allow persons with bad credit to still participate in large expenditures such as the purchase of a home or a car. This is thought to help stimulate the economy by encouraging more transactions, especially in the real estate sector.
What Are Some Characteristics of Bad Credit Loans?
Bad credit lenders must constantly deal with the high risk that borrowers will not pay the loan back. In order to compensate for this risk, bad credit loans often involve various mechanisms to protect the lender, including:
- Very high interest rates
- Monthly rates that are subject to sudden change
- Balloon payments (payments that increase over time or involve a large payment at the end)
- Various non-payment penalty clauses
Thus, while a bad credit lender may be in a position to actually help the borrower by providing her with a loan, the borrower should still take caution when dealing with a bad credit lender. For instance, the borrower should understand all the terms in a mortgage in order to prepare for the possibility of a sudden payment increase. This is often the case with subprime mortgage lending.
What Are Some Common Bad Credit Lender Disputes?
Some common types of bad credit lender disputes may include:
- Missed payments: Mortgage defaults and other kinds of missed payments can lead to a private lawsuit for damages.
- Second or third mortgages: It is common for a bad credit loan to lead to another mortgage, called a junior mortgage. This can complicate future issues such as a foreclosure proceeding
- Fraud: Bad credit scams and fraud schemes can sometimes occur in relation to a bad credit loan arrangement. These can be avoided through a proper examination of the loan terms.
- In cases of very serious disputes, it may be necessary to file a civil claim for damages. This will help the non-breaching party to recover legal remedies such as an award for damages.
Do I Need a Lawyer for Help with Bad Credit Lender Disputes?
Disputes over a bad credit lending arrangement can often be complex, no matter what type of loan is involved. You may need to hire a lawyer if you need legal assistance or representation regarding your financial matters. Your attorney can represent you in court and can help protect your interests during the process.