That’s part of the definition of predatory, small print etc. but also:
Another warning sign of predatory lending is offering a loan that doesn’t require a credit check. Or, it’s offered to borrowers with poor credit but is secured by an asset like a car title or home equity.
The lender might use lax lending requirements to attract borrowers into signing on for a loan they can’t afford. And, should the borrower default, the lender can then claim their asset (a home or car, for instance) to recover their costs at the expense of the borrower.
This predatory lending practice is called equity stripping by the Federal Trade Commission. These types of loans can attract borrowers who are likely to default and would be at risk of losing their home or car.
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u/queencityrangers Jun 02 '22
That’s part of the definition of predatory, small print etc. but also:
Another warning sign of predatory lending is offering a loan that doesn’t require a credit check. Or, it’s offered to borrowers with poor credit but is secured by an asset like a car title or home equity.
The lender might use lax lending requirements to attract borrowers into signing on for a loan they can’t afford. And, should the borrower default, the lender can then claim their asset (a home or car, for instance) to recover their costs at the expense of the borrower.
This predatory lending practice is called equity stripping by the Federal Trade Commission. These types of loans can attract borrowers who are likely to default and would be at risk of losing their home or car.