Debt Consolidation vs. Predatory Lending
“Predatory lending” is a term you might hear being tossed around quite a bit these days. It’s often applied to different types of lending, and the bogeyman of the week might be anything from a bank to a lending firm to payday advance.
So let’s clear the air. First of all, debt consolidation, as it is typically defined, is not, in any way, shape or form, a type of predatory lending.
Predatory lending is a type of lending where the lender’s real goal is to bury the borrower in unpayable debt. This can be motivated by any number of things. A mortgage lender might be hoping to foreclose on a home and sell it to the highest bidder, for example. A car dealership might be hoping to repossess the car and resell it as “gently used”.
Debt consolidation is, in fact, the exact opposite of predatory lending. The debt consolidation is most certainly not built on the idea of putting people further into debt. Rather, just as the name implies, debt consolidation is about consolidating debt. The industry is built on the premise of eliminating debt, not increasing it.
The truth is that the vast majority of lenders, in any branch of the business, are by and large fairly honest and ethical. True, there are always those looking to make a fast buck by collecting foreclosed homes rather than timely loan payments, but it’s the easiest thing in the world to simply go through a reputable lending agency to find a reputable lender.
As long as you know how to identify a loan shark when you see one, you shouldn’t have to worry about becoming prey for a predatory lender. If anything, the debt consolidation business is actively combating predatory lending by offering more options for borrowers to settle bad debts. Besides which, the model of a successful debt consolidation group simply doesn’t allow for predatory lending. Debt consolidation offers fixed interest rates and is built on the premise of making loan payments manageable, and that alone contradicts what predatory lending is all about.
almost perfect his predition. The only mistake is that FED decreased the interest rates, instead of increasing. He assumed a “goof FED”, instead of an “evil FED”.
Debt consolidation advice.
This is, as usual, completely misleading. There were no Federal regulations that forced banks to make bad loans. Banks were/are forced to treat everyone the same and so cannot discriminate against people because they are, shock horror, black or do not live on Park Avenue. The issue with the sub prime and prime loans was that they threw away good sense and made loans that they should never have done. No one forced them to do this. As for the predatory lending, they lent money with ridiculous terms to people just because they were minorities etc. The two things are completely separate.
It's not the same on your credit report as debt consolidation, but it is still in effect debt consolidation, and the trouble with debt consolidation is that unless you change your habits, you have the potential to get into even bigger debt because you have the ability to run up more debt on the now cleared card.
You would have to default on your credit cards which hurts bad.
Have you considered a debt consolidation loan, or a no-collateral signature loan? This would help your credit a lot and spread out the payments over a longer period of time. HOWEVER, you can't run the cards back up again.
There's plenty of blame to go around, but I think these are three of the significant factors:
1. When the Community Reinvestment Act was initiated, there were some protections in place as well against predatory lending practices. The Community Reinvestment Act has been around for about thirty years, so why the problem now? Deregulation.
2. While a poor person might not be accustomed to the complexities of home buying and mortgage loans, the banks were. The banks used predatory lending practices to make loans that they KNEW were high risk. So they made the loans, bundled them and resold them to strip off their fees and pass on the risks. Now on PBS (2/6) ran an interesting piece on this very subject, of particular interest is 'reverse red-lining'.
3. Clinton and a veto-proof Republican Congress killed Glass-Steagall in 1999. That's what allowed those fraudulently rated 'exotics' to be passed throughout, and to contaminate, the banking AND speculative investment market pool. And the rating firms played along in the game.
http://www.counterpunch.org/kaufman09192008.html
Most likely not. Student loans are one of the few things that get paid back no matter what happens to you. About the only way to get out of repaying student loans is to die.
If they are already garnishing your wages, the lender will not stop until all your arrearage has been repaid and a debt consolidation company isn't likely to be able to arrange that.
Be very careful and only use a company that you trust and know something about (someone else you know has used them with good success). Debt consolidation schemes are quickly becoming the biggest scams in the financial industry taking your money and leaving you worse off than you were in the first place.
IT’S OKAY THANK YOU
I don't necessarily love the Fed, however, they're not "all out to get us".
Scenario. You have $10,000 and you want to put to work. There are 2 people that want to borrow it. One is a Doctor, who doesn't like banks, but will repay a total of 11,000 later. The other is a heavy drug user. He has had a job for 2 weeks, and can afford the payments, but he also has a very poor work history.
If either doesn't pay you, you have to repossess the car, re-sell it (now worth 30% less because it's used), and hope that it's in good condition.
All things being equal, you'll lend to the Doctor first. The question is, at what price is it worth it to YOU to take that risk? My guess is that you wouldn't take less than about $15,000. You earn more because you're taking a risk. He pays more because he knows that he's risky. You'd be a fool to think that they required the same amount of risk.
If they put regulations in place (such as you can't make more than 11k on a 10k loan) then the second guy can't buy a car at ALL because people would rather not lend to him at all.
Risk/reward is what it comes down to.
….and for the record, 8-12% does not come close to "predatory lending".
Take a look at the "payday loan" places. They generally charge between 400% to 1000% per year.