Everyday Cheapskate: Home Equity Scams
Homeowners beware. These days, home loan scam artists are lurking around every corner. They're hungry, they're determined and they're coming after your equity.
Unscrupulous loan peddlers are known as predatory lenders because of their uncanny resemblance to vultures. These loans encourage people to consolidate their debts and suggest this will prevent them from ever overspending and maxing out their credit cards again.
Predatory lenders deal in asset-based lending: They make the loans based solely on the amount of equity a borrower has in a property rather than considering the borrower's ability to repay the loan.
DECEPTIVE MARKETING
Victims of predatory lending frequently describe being subjected to a flood of phone calls and letters from brokers and lenders, encouraging them to take out a home equity loan.
Red flag: Lenders who engage in high-pressure tactics, telemarketing, cold calling and deceptive advertising campaigns.
EXCESSIVE FEES
Predatory lenders routinely charge borrowers fees totaling as much as 15% to 20% of the loan amount. Fees alone can have a ruinous impact on a homeowner's equity. But add them to prepayment penalties and you're locked into a high-rate, financially disastrous loan.
Red flag: You inquire about fees and charges, but you can't get the facts. They insist there are no "upfront" fees.
EQUITY STRIPPING
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