Predatory Lending Through Loan Steering

With the real estate industry still in high gear from the last five years of skyrocketing prices and low interest rates, predatory lending is at an all time high. The term has no hard definition, but it generally refers to those lenders who go out of their way to offer loans to buyers at substantially higher prices than those buyers would be able to find elsewhere. Predatory lending is a profitable business, and it is often disguised as legitimate lending by unscrupulous lenders or their agents.

It often works like this: An agent working for a lender, perhaps on their own, tells a prospective loan applicant that he or she doesn't qualify for the mortgage for which they applied. The agent adds that not only will this lender not approve them for a mortgage, but in all likelihood, neither will any other major lender. The agent then assures the borrower that everything will be all right, because he knows of a lender that can get the customer a loan.

At that point, he refers the customer to this other lender, with whom he is working. This lender will make a loan available to the buyer, but the loan has a high interest rate, exceedingly high closing costs, and a prepayment penalty that will make it quite difficult for the buyer to refinance later. The buyer, not knowing any better and feeling as though he or she cannot do any better elsewhere, signs the contract and accepts the high-priced loan.

The shady dealings don't end there. Often, such predatory lenders are interested in not only the loan proceeds, but the property itself. By offering high priced loans to people who may have credit and/or income problems, the lenders may be banking on the buyer being unable to meet their monthly mortgage payment. Once the buyer defaults, the lender can take the property through foreclosure and sell it at a profit. The lender gets property that they can easily sell, and the agent gets a commission from the loan and another kickback once the house is sold. The buyer, unfortunately, is left with damaged credit and no place to live.

Loan steering, as this practice is called, is most common in areas where buyers are poor or have credit histories that may make them less likely to qualify for a loan with a major lender. The people who practice this form of predatory lending are easily able to take advantage of customers who either don't know any better or those who think they cannot find a better deal with another lender.

If a lender denies your loan application and assures you that no one else will lend to you and then offers to send you to someone who will, be suspicious. It's much easier to simply check with other lenders yourself than to fall into a predatory lending trap.

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How To Reduce Credit Card Debt

If you want the credit card companies off your back, credit card debt reduction is the name of the game. There are a number of ways to reduce your credit card debt; however which method you should use relies on your specific situation. Here are some situations regarding credit card debt and which credit card debt reduction solutions are ideal in each case.

Situation 1: You're Making Payments On-time but Your Debt Won?t Go Down

Explanation: Basically in this case, you have credit card debt, you're making payments, but it's not going down. This is a sign that you're using your credit card(s) too much OR you're only paying the required monthly minimum payment.

Solution: You need to either a) pay more than the monthly minimum, or b) stop using your Credit Cards. In this case, the creditors probably aren?t calling, so you can handle this type of credit card debt reduction on your own. Check out ways to eliminate credit card debt on your own.

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Situation 2: Debt is Rapidly Increasing and you're Missing Payments

Explanation: In this situation, you're debt is starting to spin out of control and you're losing control of it fast!

Solution: You need to Stop, Look, Plan, and Act. This means you need to STOP using your credit card(s), LOOK at your expenses to see why your debt is increasing so rapidly, PLAN a way to change all this, and ACT on the plan ASAP. The best PLAN for this type of situation is to drastically cut your spending. There's obviously something that's causing your credit card debt to spin out of control. Maybe it's too many luxury purchases. Maybe you're a DVD nut and purchase new DVDs every week. In any case, you need to identify what you're spending too much on. If all your spending is on necessities, then you're not making enough to cover your debt. In this case, it's best to get credit counseling help.

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Situation 3: The Creditors are calling

Explanation: You've defaulted on numerous monthly payments and the credit card company has sent your account into collections (AKA you're in serious trouble).
Solution: You need to sell what you can to pay off your debt or get professional help. This means if you have an extra car, boat, or even property that you can afford to sell, sell it. When the creditors start calling, your credit is in jeopardy and you need to do everything you can to get your finances back in order. If you have nothing to sell, it's time to negotiate with your creditors, consolidate your debt (if you have multiple Credit Cards) or get credit counseling. Negotiating with your creditors is possible but if you don?t know how to negotiate, it's best to consult a credit counseling service. They'll let you know if debt consolidation is your best bet or if they need to intervene and negotiate a payment plan for you with the creditors. In any case, it's a good idea to consult any Debt Relief Company for details on specific types of debt and an explanation of available debt relief and credit counseling solutions.

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