MINNEAPOLIS, June 13, 2012 /PRNewswire/ -- There are many federal statutes in place to protect consumers from unethical financial industry practices, such as the Truth in Lending Act, Fair Credit Reporting Act and Home Equity Loan Consumer Protection Act. Even with these measures, borrowers must be aware of ploys that some use to lure unsuspecting consumers. To avoid further debt, FastLoan.org discusses these traps so people can borrow more responsibly.
The five most common practices are predatory auto loans, misleading contracts for credit cards, debt relief rip-offs, shady mortgages and payday loans. These practices have a common thread: excessive fees and unreasonable penalties for the borrower with bad credit and large profits for the lender.
When shopping for a vehicle, one must be aware of predatory auto loans. Lenders will offer zero or low introductory rates and then raise them significantly after a period of time. They also use hidden fees and inflated prices for additions.
Credit cards will offer similar no or low interest rates when opening a new account until the initial rate expires and the interest dramatically increases. Many offer free or cheap balance transfer promotions to gain business but have strings attached like high interest or penalties if the balance is not paid off within their set parameters. They may also have expensive fees and penalties for late or missed payments. Credit card companies earn billions of dollars a year from these fees.
People must be wary of debt relief companies that offer to greatly reduce debt, stop collection calls and protect against garnishment of wages. These companies cannot always deliver on their promises but charge high fees for their services, putting customers further into debt.
Many are well aware of the subprime mortgages and foreclosures that rocked the country in 2008. Mortgage companies approved people for loans with questionable credit and minimal documentation. The initial low monthly payments ballooned after 3-5 years leaving mortgage holders with excessive interest rates and high monthly payments. This snowballed into the foreclosure crisis.
Borrowers must also be cautious when using payday loans. These are often saddled with high interest rates, steep penalties and a short amount of time to pay back the loan. Like all financial commitments, the contracts must be read carefully and fully understood before agreeing to the terms.
In order for people to protect themselves and borrow responsibly, they must know their legal rights and be aware of unfair practices by financial institutions. By doing so, these common pitfalls can be avoided and consumers can protect themselves from falling deeper into debt.
FastLoan.org provides a quick and convenient access to online loans. This site is not a lender, rather it provides a service to match consumers with lenders to obtain the fast loan they need.
Contact: Marlene Brown
Media Relations Specialist
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