What are payday loans and other predatory loans?

Financial watchdog groups have expressed concern about predatory lenders taking advantage of low-income Americans in need of quick cash as soaring inflation weighs on consumers.

So what is a predatory loan?

Predatory lending imposes unfair or abusive loan terms on borrowers, such as triple-digit interest rates and short repayment terms. A “fair” loan, on the other hand, According to federal guidelines, all consumers have the same financing opportunities. This includes low cost loans for those with good credit.

Predatory lenders can also persuade borrowers to accept unfair terms through deceptive, coercive, exploitative, or unscrupulous acts. According to Orlando-based debt.org, an online site that offers advice from financial experts. One example is a lender that serves borrowers with credit problems or those who have recently lost their jobs.

predatory lending And, according to the federal attorney’s office in eastern Pennsylvania, the cost of a mortgage is so high that more and more borrowers are unable to maintain their homes, and lenders are using it to “trick” consumers into taking out loans they can’t afford. May contain fraudulent, deceptive and unfair tactics. in good repair.

A person drives a scooter past a check cashing and payday loan store in downtown Los Angeles on March 11, 2022.
Patrick T. Fallon/AFP via Getty Images

Responsible Financing CenterA North Carolina-based nonprofit research organization working to end predatory lending. investigated the “lasting harm of high-cost installment loans,” a form of predatory lending that includes “rental bank” loans. The group says it found that predatory loans had a greater impact on people of color and on lower incomes.

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