Predatory Lenders May Be Threatening Your Family's Financial Safety:
Markell Shows How to Avoid the Devil in the Details
Dover, DE - As the problem of subprime lenders takes the center stage in Washington D.C. this week, Jack Markell, Delaware's State Treasurer reminds Delawareans to remain vigilant by taking proactive steps to avoid falling victim to predatory lenders.
"When taking out a loan or getting a credit card the devil really is in the details," Mr. Markell said Tuesday. "The hidden costs in fine print can not only derail budgets, but can have severe impact on your financial future. Until there are real reforms in place to put a stop to predatory lending, consumers must remain alert when applying for and receiving loans."
The term subprime lending (also called non-prime, special finance and second chance lending) is generally used to describe a particular lending market sector. Typically, these customers are those who don't qualify for prime market rates because of blemished or limited credit histories. Subprime customers are then charged a higher interest rate to compensate for the increased rate should they default on their loans. Subprime customers are generally defined as individuals with limited incomes or a credit score below 620 on a scale between 300 and 850.
"For a long time this type of predatory loan has kept people locked in a cycle of poverty," Markell stated. "I'm encouraged that Congress has made addressing this issue a priority."
Mary Dupont, Executive Director of Nehemiah Gateway Community Development Corporation added, "We hear horror stories every week of our neighbors receiving these loans that they never could repay. From refund anticipation loans to unscrupulous used car dealers, people end up paying much more in interest than in principal."
Some tips that Markell and Nehemiah Gateway Community Development Corp. offers to consumers to avoid high-cost loans:
- Avoid the Flash. Flashy ads on television and high-pressure telemarketers often offer fast and easy loans without disclosing all of the details. Remember your parent's wisdom..." If it's too good to be true - it usually is."
- Annually check your credit reports and scores Every year check with the three primary credit bureaus (Equifax 800/685-1111; Experian 888/397-3742 and TransUnion 800/916-8800 or visit www.annualcreditreport.com. (This is the only website authorized to provide you with your free annual credit report.)
- Address any errors. Take care of any discrepancies or disputes in your credit history before you begin looking for a loan. Your history and score directly affect your rate, and the better your credit score, the better your rate.
- If you need credit repair or help seek out a non-profit. Their only business is to help you. Call the Delaware Help Line at 800/464-4357 and ask for information about housing counseling to locate help near you.
- Do your homework. Don't trust that lenders to tell you that they are trustworthy - check with the Better Business Bureau by calling your local chapter or by visiting www.bbb.org to check if there have been any complaints filed against the lender.
- Ask questions. If you don't understand the specifics of the deal, ask as many questions as necessary until you do. Remember, it's your financial future on the line.
- Shop around. Contact both lenders and mortgage brokers who offer credit directly. Tell them your score and ask for the interest rate along with an estimate of all fees you might be charged including lender points. Many lenders will email, mail or fax a Good Faith Estimate Form with all of this information disclosed.
- Compare the total cost. Mortgages include fees and other costs in addition to the monthly payment - make sure that you compare the finial tally so you don't wind up paying more in the end.
- Read the fine print, and then read it again. Verify that what you are signing is what you have verbally agreed to. Don't sign anything that doesn't agree with what the salesperson presented.
- Think it over thoroughly. You don't have to take the first loan that you are offered. Take the time to think things over and ask for help from someone you trust if you need to. Again, don't give in to fast-talking, high pressure sales pitches.
- Share your story. If you've been the victim of predatory lending, let others know about your experience. Call the Delaware Attorney General's Office Fraud & Consumer Protection Division toll-free 800/220-5454 and also report your experience to the consumer counselors at the Federal Trade Commission at 877/FTC-HELP (877/382-4357).
