One of the dangers facing consumers with bad credit comes from predatory lenders. These are lenders who try to primarily take advantage of people that have trouble borrowing from a legitimate lender.
By: Hitesh Khan/
Predatory lenders often target elderly and low-income consumers, people with bad credit and those who are unfamiliar with home loans and mortgages.
While people with a good credit score have more options when borrowing money, those with bad credit or who fall into one of these categories tend to have fewer choices. As a result, they may be susceptible to offers from predatory lenders.
However, predatory lenders do not offer access to money at fair rates with reasonable rates and terms.
Instead, their offers generally involve incredibly high interest rates and fees, as well as unnecessary costs and unaffordable repayment terms. The offers from such lenders may even be illegal.
Consumers should be careful any time they are offered “bargain loans,” deals that promise having no credit is no problem, and offers that are only said to be available for a short time.
Borrowers should question whether they are encountering predatory lending if they feel pressured, and if they are promised next-day approval or “guaranteed” low-interest loans.
Instead of rushing into a loan agreement, consumers need to make sure they understand the terms of any loan before agreeing to borrow, and check that what they are asked to sign is the same as what they discussed with the salesperson.
Consumers with bad credit should do their homework to make sure they are not dealing with an illegal predatory lending agent. To do this, they can request references from the lender and check them out. Separately, it is worthwhile to compare the lender’s rates and total costs to those offered by other lenders and local banks to determine if they are in line with what else is out there.
Specific examples of illegal predatory lending scams include loans that require advance fees. It is against the law for anyone to request or accept payment for their services before the consumer actually gets the loan or credit.
The Singapore Police Force said cases of harassment linked to activities of illegal predatory lending in Singapore went up by about 20 per cent to 4,619 cases last year. There was also a 33.5 per cent jump in harassment by electronic means such as on social media and SMS, with these instances forming the bulk of such cases reported last year.
The police noted that more foreign workers are increasingly borrowing money from unlicensed moneylenders. To tackle this growing problem, the Police they have engaged maid employment agencies and businesses to educate these workers against borrowing from loan sharks.
Even though efforts to put up police cameras in neighbourhoods have forced illegal predatory lending agents and agencies to change to non-confrontational and less damaging tactics, such as placing harassment notes in letterboxes, the police said that the proliferation of new communication platforms and smartphones has made it easier for debtors to be harassed through electronic means and for larger groups of people to be targeted.
But police cameras have failed to deter the most persistent harassment of illegal predatory lenders.
The best advise anyone can get when faced with financial crunch is to cope with cash flow without borrowing. Before you are late on a rent, mortgage, or utility payment, speak with the creditor. For non-interest bills, such as utility or telephone bills, ask about making payment arrangements. Ask to delay payment until your pay arrives or set up a repayment schedule that stretches out payments.
Those in financial crunch may ask your friends or family to lend you money. Remember that a written agreement to repay the loan can help avoid family strife later. Licensed money lenders who charge no more than 4% interest per month on the amount you have borrowed, are another source for those under financial stress.
But before you approach a licensed money lender, consider other alternatives, such as the various financial assistance schemes offered by various Government agencies. As you are legally obliged to fulfill any loan contract you enter into with a licensed moneylender, consider whether you are able to abide by the contractual terms, bearing in mind your income and financial obligations.
Borrow only what you need and are able to repay. Be mindful that if you are unable to meet the contractual terms, the late payment fees and interest payment will be a financial strain not just on yourself but also on your family. The law requires moneylenders to explain the terms of a loan to you in a language you understand and to provide you with a copy of the loan contract. Make sure you fully understand the terms of the contract, in particular, the repayment schedule, the interest rate charged and the fees applicable.
Regardless of how much of a financial crunch you are in, you should always shop around different moneylenders for the most favourable terms. You should not rush into and commit yourself to a loan until you are satisfied with the terms and conditions.
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