In conjunction with National Consumer Protection Week, February 5-10, 2001, Better Business Bureaus (BBB) are joining with other consumer assistance organizations to educate consumers on abusive lending practices.
Not all loans or lenders are created equal, particularly when you use your most valuable asset, your home, as collateral. The cost of doing business with a non-traditional, high-cost second mortgage company can be high. Some unscrupulous lenders target elderly and low-income homeowners and those with credit problems. These lenders may offer loans based on the equity in your home, not on your ability to repay the loan. High interest rates and credit costs can make borrowing money using your home very expensive.
You can protect yourself against losing your home to inappropriate lending practices. Here's how:
Don't:
- Agree to a home equity loan if you don't have enough income to make the monthly payments.
- Sign any document you haven't read or any document that has blank spaces to be filled in after you sign.
- Agree to a loan that includes credit insurance or extra products you don't want.
- Let the promise of extra cash or lower monthly payments get in the way of your good judgement about whether the cost you will pay for the loan is really worth it.
- Deed your property to anyone. First consult an attorney, a knowledgeable family member, or someone else you trust.
Do:
- Contact the Better Business Bureau to obtain a reliability report on the lending company before making a decision.
- Ask specifically if credit insurance is required as a condition of the loan. If it isn't, and a charge is included in your loan and you don't want the insurance, ask that the charge be removed from the loan documents.
- Keep careful records of what you've paid, including billing statements and canceled checks. Challenge any charge you think is inaccurate.
- Read all items in the contract carefully, before you sign. If you need an explanation of any terms or conditions, talk to someone you can trust, such as a knowledgeable family member or an attorney. Consider all the costs of financing before you agree to a loan.
If you think your lender has violated the law, contact the BBB, your state's attorney general's office or the Federal Trade Commission (FTC). For more information on abusive lending practices visit the BBB's web site.
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