The practice of predatory lending can often times rear its head during instances of crisis, such as the COVID-19 pandemic. Predatory lending is defined as any unfair practice that inhibits the borrower's ability to repay their loan and only benefits the lender. A new Bankrate report
serves as a warning for borrowers and includes the signs to be wary of when taking out a mortgage.
Some of the signs including high interest rates, excessive fees, no credit checks and a bad reputation are the most obvious. However, the report cautions borrowers to look for hidden fees, prepayment penalties, balloon payments, loan packing, loan flipping, negative amortization and any lender who wants to access your bank account.
"Not only is COVID-19 shaking the global economy and the livelihoods of millions, it’s also creating a ripe environment for predatory lenders," the Bankrate piece reports. "They are targeting vulnerable individuals who are struggling to make mortgage payments or going into default. These lenders may offer low-cost loans to seemingly pull a consumer out of a financial hole, but actually digs them deeper, or loans with unfair rates and terms, knowing their victims can’t reasonably pay them back."
The report also stated that there are plenty of reputable lenders who are willing to get the best loans possible, without triggering one of the aforementioned warning signs.
to read Bankrate's full report on predatory lending.