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Home / Finance / Banking / What is predatory lending?
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What is predatory lending?

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0 2022-07-19T10:43:41+00:00

Predatory lending means embedding unfair, deceptive, or loan terms in the loan agreement which can trouble the borrower. When a lender provides a loan at a higher interest rate than the current market value or the loan carries high fees, strips the borrower of equity, or even gives low credit rates to a credit-worthy borrower so that the lender can benefit from it, it is known as predatory lending meaning.

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Now that we know what is predatory lending, let us learn how this process works.

How does predatory lending work?

To get benefits, a predatory lender uses aggressive sales tactics to trap the borrowers. By taking fraud actions or taking advantage of the borrower’s lack of understanding of financial transactions the predatory lenders offer loans to the buyers. An example of a predatory loan will is a loan shark. In this scheme, the lender offers a loan at a higher interest rate even after knowing the borrower won't be able to repay that amount of loan. The lender threatens or forces the borrower to pay the loan when they fail to pay the debt.

 

Predatory lending is carried out by banks, finance companies, mortgage brokers, attorneys, and real estate contractors. So, before securing a loan, always check out the contracts thoroughly. Also, I would suggest you avail loan from a bank which is known for its good customer feedback. Never take loans from any unheard banks or lenders. I hope you know what is predatory lending now.

 

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