Being a subprime borrower is hard enough without having to worry about predatory lending. With a credit score below 650 (a common definition of sub-prime), a sub-prime borrower has likely already faced bankruptcy filings, collection records, late payments and other credit report negatives. These past financial difficulties can lead to future financial problems.
Borrowers with a low credit score often will have to pay higher rates for credit cards, cell phones, utilities, apartments and insurance. Along with these higher prices, sub prime borrowers (especially the elderly) can be targeted by unscrupulous lenders offering expensive or illegal loans. Sub-prime lending occurs in almost every aspect of the lending industry, from mortgages, auto loans, personal and payday loans. We reached out to a representative from KBU Texas loans to gain additional details on how borrowers may protect themselves from being a victim of choosing a bad loan offer or entering into a financial agreement that could lead to financial hardships.
While regulating these large lenders is a great step toward consumer protection, in reality smaller unscrupulous lenders often do the most damage. Targeting subprime borrowers (sometimes even door to door), these true predatory lenders pressure consumers into expensive loans that often lead to foreclosure.
What can subprime borrowers do to protect themselves from predatory lending? Awareness of the risks and comparison shopping are extremely important. Subprime borrowers should expect to pay higher rates because of their credit standing, but they do not need to accept the first offer they receive. Shopping and comparing loan options online can help a borrower determine what rates they really deserve based on their credit standing. Borrowers should also look out for some predatory lending red flags such as prepayment penalties and balloon loans. Suprime borrowers should know their rights before they sign on the dotted line