What is predatory lending? 

On Behalf of | Oct 1, 2022 | Bankruptcy

People are often quick to only blame the person who took out a loan or a line of credit if they can’t pay it back. They assume that this individual made a mistake and took out an unaffordable loan.

But some types of lending are actually predatory and they’re designed to be very problematic for the borrower. It’s important to understand that lenders can do this intentionally and how it may impact someone’s finances.

Abusive loan terms

Predatory lending can be defined in many different ways, but it often centers around abusive loan terms that are either deceptive or unfair. Everything in the loan terms is strongly weighted to the lender’s benefit and a reasonable person would understand that it is a poor financial move for the borrower.

For instance, predatory lending often comes with high fees, requires you to pay the loan back very quickly and has high interest rates. The lender is literally hoping that you can’t afford to pay them back so that they can start increasing the amount that you owe.

You may wonder why people would ever take out these types of loans, but predatory companies specifically go after those that they consider in a significant position of need. Someone who can’t afford to pay the bills that month, for example, may be more likely to take a gamble with unfair loan terms. Essentially, these companies are targeting people who feel desperate.

What options do you have?

If you find yourself victimized by poor loan terms and facing overwhelming debt, make sure you know about all of the options at your disposal.