Don't be an Unscrupulous Lender's Fool!
Do you know how to recognize a financial scam when you see one?
Not a single person can honestly consider himself or herself completely immune from every kind of scam- there are an awful lot of scams out there, after all. Furthermore, scam artists are always coming up with new ways to trick their victims into forking over their money. To make matters worse, if you're young, inexperienced in finances, or in debt, you become the ideal target for such perpetrators because you are the most likely to want a quick fix and will be duped into scams and fraudulent or exploitive financial practices. This is not to say in any way that you are any less intelligent than anybody else. Falling victim to a scam can happen to the brightest of us. So if you want to protect yourself from being an unscrupulous scam artist's fool, you need to remain skeptical of anything that sounds too-good-to-be-true, and always inform yourself about every aspect of a financial deal.
One of the most common schemes used out there is called "equity stripping." This is used most frequently among people who haven't got much by way of disposable income; however, they have built up equity in their home. Abusive lenders see this as an opportunity to try to convince you that you get a loan as long as you're willing to pad your income. Even if you know very well that you'd never be able to afford the payments for this type of deal, a scam artist can be extremely persuasive and will often talk people into applying for a loan.
Don't be one of these April fools.
With the loan in place, the unscrupulous lender simply sits back and waits for you to default on your payments; this is his or her opportunity to swoop in and foreclose on your home, stripping you of any equity you have built up over years of faithful payments.
Any financial opportunity that sounds too-good-to-be-true almost certainly is. If you know that you can't afford to make payments on a loan, don't apply for it. Plain and simple. This is much easier to do when you make it a policy never to make a financial decision on the spot. This allows you the time to consider the legitimacy of an offer you've had, to discuss it with someone else, to read the fine print, and even to talk to the lender directly.
Some lenders will offer you a term that saves you from foreclosure in case you happen to fall behind on a payment or two. This term includes refinancing your mortgage for lower payments. Certainly this sounds like an attractive deal when you're struggling to make payments; however, you need to look at what is involved in the "big picture." Many times, the reason that the lender can lower the payments is that you're only actually paying the interest, and you'll be hit with a tremendous balloon payment at the end of your mortgage. Then, if you are unable to pay off this entire amount, or refinance your loan, your lender forecloses on the house. This means that you've lost all that money you've been paying off, as well as your home. This is a common technique and should be avoided at all costs.
Lately, the news has also shown a popular scam technique called loan flipping. This occurs when a lender offers to refinance your mortgage allowing you to take money out of the equity you have in your home. When you need cash, this always seems like an appealing offer. However, after you've made a few payments, you'll receive a call from your lender, offering you a fresh opportunity where you can refinance a second time, increasing your loan so that you can take even more out of your home equity. Every time you agree to one of these deals, the lender adds fees and charges to your debt, and may even increase your rate of interest. Your debt increases so rapidly, that you may soon loose your home after you find yourself in well over your head.
Of course, this is just a sample of the many scams unscrupulous lenders and scam artists will offer you as opportunities.
To protect yourself from becoming the fool of one of these perpetrators, stick to the following rules religiously:
- Never agree to a home equity loan where you know you cannot afford the payments, no matter how persuasive the person offering the deal may be.
- Never sign any document on the spot without being able to consider it at length.
Have it reviewed by others, and consult a professional if you need to.
- Never allow a lender to add credit insurance or any other additional products or services that you don't want or need.
- Never give your personal information such as your Social Security Number or even your mother's maiden name (a common password in financial institutions) unless you are absolutely certain that you are dealing with a reputable business.
- Always be wary of lenders who initiate the contact with you.
A healthy dose of skepticism goes a long way when it comes to matters involving your money. It can be the difference between remaining safe and becoming an unscrupulous lender's fool.
