How Do I Avoid Predatory Consolidation Lenders?

From time to time, you may be desperate for financial assistance. The need for monetary aid may be due to excessive medical bills, mortgages, or a household emergency. 

Your current financial situation may push you to financial debt or bankruptcy when the math does not add up. It is at this moment you should know about a debt consolidation loan and debt relief option. 

However, you must always make very effort to find a reliable company before you accept a debt consolidation loan. Here is what you need to know to avoid predatory consolidation lenders. 

If it Looks to Good to Be True—

Predatory lenders are always willing to take advantage of the customer by offering them incredible rates, terms and payments, in an effort to present something too enticing to reject. 

If you research a debt consolidation loan at freedomdebtrelief.com, you’ll learn what to expect from reputable lenders. You’ll also learn to spot the following warning signs to protect yourself from predatory lenders.

High-Risk Secured Lending

Predatory lending involves borrowing against the value of your assets. Such lenders often focus on the value of assets such as houses or cars to attract borrowers with low credit ratings but willing to consolidate their debts a single debt consolidation loan

With this high-risk lending, lenders can repose your collateral assets once you default on repayments. They can even sue you for a shortfall. The lender does not mind your low rating or ability to repay late repayments on your last mortgage. Such loans are expensive, with high interest rates and additional fees that remain hidden to the borrower.  This practice remains a good sign of a lender luring sign the loan without thinking through.

High Interest Rates in Bait and Switch

A predatory lender will entice borrowers with an easy, fast application, convenient process. They often advertise impressive rates you cannot ignore. Such rates do not exist even for the people with the best credit scores. Besides these too good to be true rates, they complement you with excellent customer service and a speedy application process. 

They encourage you to sign the terms of the agreement by reducing the number of questions to make the process as convenient as possible.  Online lenders often utilize this method hoping that borrowers would not read or understand the borrowing terms to seek options. With bait and switch, the actual interest rates may remain hidden until a few months later.

Negative Amortization

Many predatory lenders use negative amortization to trick you into taking a debt consolidation loan. The strategy involves setting low monthly payments to entice borrowers to take a loan. 

Beware of lenders willing to give you a loan with monthly repayments that can barely service the loan’s interests’ rates. Your debt will increase with time now that the unpaid interests go into the outstanding principal amount.

No Credit Check Requirement

A debt consolidation loan company that does not request a credit report intends to exploit the client. This sign is a good indicator for targeting high risk clients for repeated refinancing and rollovers.  They know that many clients may never repay their loans in full, and this is the opportunity to make money by rebranding predatory lending as savings or credit repair loans. 

A credible lender will want to see your credit report to ascertain your creditworthiness, outstanding loans, and repayment history to determine their lending risk. However, predatory lenders offset the credit risk by charging you high interest rates and including hidden fees to cover their losses. Be wary of debt consolidation loan companies willing to loan you money without inquiring about your finances and consequent ability to repay the loan in full.  

While financial literacy remains essential in avoiding predatory loans. Always learn to detect warning signs such as high-risk secured lending, high and low interest rates in bate and switch. Never allow yourself to be pressured to accept a debt consolidation loan before reading all of the terms and conditions. 

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