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Home mortgage sharks
By admin | January 25, 2008
Sub Prime loans are a great alternative for people who can’t otherwise get a loan from lenders in the prime market. But very often masquerading as a sub prime loan is a predatory loan.
The difference between the two is that while a sub prime loan charges a higher rate of interest from you it does so because when the lender lends money to someone with a low credit ranking he has to in some way recover his money and he does this through the high interest rate to safeguard himself from defaulting borrowers. A predatory loan however is different because here the ultimate aim of giving a borrower a loan is to acquire control over his house.
In such a type of loan system the lender imposes an unreasonably high interest rate upon the borrower along with other such unfair terms and because of this the borrower is unable to pay off the loan. Predatory loans are usually given against things that are secured against some kind of collateral so that when the person is unable to pay off the loan with the unreasonably high interest rate, the lender can repossess the property and sell it off to recover his money.
Many activists and consumer interest forums have raised the worry that such predatory lenders tend to target older people and ethnic groups that are in the minority as far as predatory loans are concerned.
There is a very thin line of distinction between sub prime loans and predatory loans. However a basic point of distinction does exist. Sub Prime lenders merely charge a rate of higher slightly higher than normal in order to cover their risks while predatory lenders charge such high interest rates so as to result in the borrower being unable to pay off the loan so that they can repossess the property.
Topics: Home Loans, Interest Rates, Subprime Mortgages, Uncategorized |
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