Be Financially Savvy

Don’t be a victim of predatory lending. It is important to know how to spot bad loans and to have some general knowledge about loans in order to keep you out of debt trouble. It is also important to be aware that there are lenders out there that are not doing good business and are trying issue bad loans to potential clients. They do this by locking people into contracts that have unreasonable terms and conditions, like very high interest rates or even variable interest rates that could go up for any reason at any time.

Often times, predatory lenders will search out individuals who may not know that much about how loans work, i.e. young adults with credit cards or even college students with student loans. Knowing this, it is good to always be skeptical when a loan seems too good to be true, because it often is. You should also always read the small print that defines the more specific terms of the loan. Knowing how loans work is very important and will help you recognize bad loans. Simply being aware of predatory lending will do a lot to keep you out of financial trouble. Here are some key points to know about loans:

Always go with a trustworthy lender like a large well known bank. If you have heard of the bank that you are taking out a loan from, then it will usually be a legitimate loan. However, always make sure that the terms and conditions are right for you because there are many different loan options available. A good lender should work with you to find a loan with terms and conditions that are suitable for your needs and your financial situation.

Make sure that the lender you are going with is official. There are many fraudulent lenders out there with names that sound official, but are actually false. Fraudulent lenders may even go as far as to send you an official looking letter in the mail stating that they will give you a loan. It is a red flag when an organization tries to lend you money, by searching you out. It should be the other way around. When you need a loan you will go find a lender. If they are coming to you, this is often a sign of a predatory lender.

Avoid “Payday loans” at all costs. These loans are also known as paycheck advances, or cash advances and are an easy way to get into financial trouble. These loans often carry an extremely high annual interest rate, of up to 400%. As the Center for Responsible Lending shows by their payday loan industry statistics, most of the industry profits are made from repeat borrowers who are not able to repay their loans on time and renew their loans by paying fees time and time again. This type of lending is often considered a legal lending trap which takes advantage of desperate people in financial turmoil. The credibility of this industry is very much uncertain and many States across the nation have outlawed payday lending all together.

Resources for Student Aid:
www.fafsa.ed.gov/
http://en.wikipedia.org/wiki/Free_Application_for_Federal_Student_Aid
http://www.fafsa.ed.gov/faq003.htm

Resources on Responsible Lending:
http://www.responsiblelending.org/