High risk loans are loans wherein the borrower is more likely to skip payments or default when compared to more traditional loans. These loans are often personal loans for smaller amounts, though they can also exist for higher amounts and for other loan products such as mortgages. During the loan approval process, lenders may consider various high-risk factors such as:
- The applicant’s income level
- Ability to repay
- Credit history (i.e., bad credit or no credit history)
- Whether or not they will be securing the loan with property
- Previous history of payment on loans
What Are Some Common Disputes over High-Risk Loans?
The most common type of dispute over a high-risk loan is that of default, which happens when the borrower fails to make payments on the loan. This is the main issue that lenders are concerned with in the first place, and often enforce many measures to try and prevent these. For instance, they may charge very high fees and interest rates, which may help them absorb the losses due to a default.
Defaults are not good also for a borrower, as such types of actions can have very negative effects on their credit score. Defaulting borrowers also risk legal action against them, and may have a lien placed on their property for repossession or other such measures, depending on the loan terms.
Other disputes over high-risk loans may include loan fraud, identity theft, tax-related violations, and other legal issues.
How Are Disputes over High-Risk Loans Resolved?
As mentioned, a default on a high-risk loan may result in several types of actions, such as a lien being placed on the borrower’s property. This allows the creditor to take possession of their property and sell it in order to recoup the losses due to the default. Other actions might include a lawsuit for damages, in which the non-breaching party can collect a monetary award for losses.
In some cases, other issues might be at play, such as loan fraud or misrepresentation. This is a common issue for loans that involve online lending, as many fraudulent companies exist on the internet. These can lead to penalties for such companies, and may even result in criminal charges for widespread legal violations.
Should I Hire a Lawyer for Help with a High-Risk Loan?
High-risk loans can often provide financing options for persons who might otherwise have difficulty in securing assistance. They can, however, be linked to certain types of legal issues and disputes. You may wish to hire a finance or bankruptcy attorney if you need information or assistance regarding a high-risk loan. Your lawyer can advise you on your best options under the laws in your state. Also, if you need to file a lawsuit due to a dispute, your attorney can provide representation during court meetings.