Predatory lending is a scam where a person or group can obtain real estate property without having to pay the fair value of the property. Predatory lenders look for people who are in need of a loan or a mortgage and use the deed of the property as collateral until the borrower has paid back the money plus interest. If the borrower does not pay back the entire loan, the lender retains the property as repayment for the loan and will often sell it for a significantly higher value than the loan.
Predatory lenders will generally grant loans to any potential borrower, even if that borrower is obviously incapable of repaying.
There are some key signs to let you know if you are getting into a bad deal:
You should know when you should take out a loan for your home and wen you should avoid using your home as collateral for a loan. For example, if you are worried about paying back medical bills or credit card debts, keep in mind that the consequences of late payments or nonpayment will never result in the foreclosure of your home, but nonpayment on a home loan can. Therefore, it would probably not be worth the risk of taking out a home loan just to pay back credit card debt and medical bills.
There are a few other precautions you can take to reduce your risk of getting involved with a predatory lender when you take out a home loan or mortgage:
When you are about to sign the contract for a home loan, you may want to run it by a real estate attorney who has experience in dealing with home loans. Your attorney will be able to explain all the terms of the contract to you in a clear manner, and will help you decide if you are getting a good deal. Also, if you have just signed a loan and think you may have gotten into a rotten deal, you need to contact an attorney immediately. Generally you can get out of a loan within 2-3 days of signing the contract, so time is of the essence. Your attorney can also review the contract to see if there are any terms in it that are unfair and therefore not legally enforceable.
Last Modified: 02-03-2014 02:45 PM PSTLaw Library Disclaimer
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