Avoid Predatory Loans

• Don't take the first deal offered. Shop around.
• Don't sign something you don't understand. Ask questions and talk to a trusted friend or adviser.
• Don't fall for high-pressure sales tactics.
• Don't trust ads promising: "No Credit? No Problem!"
• Don't sign blank forms that the lender promises to fill in later.
• Don't borrow more money than you need.
• Don't accept payment terms that you can't meet.
• Don't agree to balloon payments. This large sum of money due at the end of a loan could cost borrowers their home if they can't meet the payment or refinance the loan (usually at an excessive cost).
• Don't purchase credit insurance with your loan. Usually this insurance is extremely profitable for the lender but provides little benefit to the borrower.

• Excessive Fees:  Fees below one percent of the loan are typical on competitive loans. Fees totaling more than five percent of the loan are typical of predatory loans.
• Abusive Prepayment Penalties:  These are fees imposed for paying off the loan early.  An abusive prepayment penalty is one that costs more than six months interest or is effective more than three years.
• Kickbacks to Brokers:  A "Yield Spread Premium" or YSP is a cash bonus that a lender gives a broker for placing borrowers in a loan with a higher than normal interest rate. The higher the interest rate, the higher the kickback to the broker, at your expense.
• Loan Flipping:  Refinancing a loan to generate fee income, without providing any net tangible benefit to the borrower, constitutes flipping.
• Unnecessary Products:  Lenders should not sell unnecessary insurance or other products along with the loan.
• Mandatory Arbitration:  Borrowers are not allowed to seek legal remedies in court if their home is threatened by loans with illegal or abusive terms.
• Steering & Targeting:  "Steering" borrowers into a "subprime" mortgage when they could qualify for a mainstream loan.