No matter how financially responsible you are, there’s a good chance that, at some point, you’ll find yourself in need of a financial loan. Loans are built into our economic system – you’ll almost certainly need one to buy a car or a home, and there’s a good chance that you needed one to pay your way through college or graduate school, too. There’s nothing wrong with borrowing money, as long as you do it in a safe way through a reliable institution. Unfortunately, “safe” doesn’t describe all loans. There are plenty of predatory lenders who seek out people who need money and scam them. The best defense against predatory lending is to know where to get money safely, and that’s what this article is all about.
The safest place to get a loan
Banks and credit unions have been issuing loans for as long as they’ve existed. And, because of that, governments have a pretty good idea about how to regulate them. Banks have a lot of people to answer to: their customers, their stockholders, their corporate owners, and, most importantly, the law. When you go to a bank, you can be pretty sure that the terms of the loan are fair. And banks are less likely to offer you a loan that you can’t afford to pay back – though, as we know from the terrible 2007 crash, it’s still on you to make sure that you’re not taking on a debt that you won’t be able to handle.
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In addition to banks, there are lending corporations. Finance companies can issue loans in much the same way that banks do, and they should be included in your search when you shop around for a major loan. Many finance companies specialize in business lending, making them a great choice for when you’re trying to start up or expand your company. Be prepared to make the case for your business – you can’t expect these companies to loan money to just anyone.
Making use of your assets
If a bank loan isn’t an option, you may be able to get a loan by using one of your assets as collateral. This is essentially how reverse mortgage services work. In the case of reverse mortgages, you’re drawing money out of your home – the opposite of a real mortgage, in which you’re paying down the debt that you accrued in buying your home. Reverse mortgages typically allow you to pay off the debt again and retain ownership of your house – essentially, you’re just making your assets more liquid while you need them. Be careful, of course, when you plan for your financial future: if you’re not prepared to lose your home, make sure that you have a method for paying off your reverse mortgage.
Avoid predatory lending services
It’s always important to understand the terms of any loan – if you can’t figure them out on your own, it’s never a bad idea to involve a lawyer. But as complicated as bank and lending institution loans can be, they’re nowhere near as dangerous as the simple – and manipulative – predatory lending practices that can be found on street corners all over the country.
Take payday lending, one of the most ubiquitous and exploitative lending practices around. These short-term loans feature unbelievably steep interest rates, and they’re specifically designed to force borrowers to come back for payday loan after payday loan – beginning a cycle of debt that is debilitating to the debtor and very lucrative to the predatory lender.
Bank loans aren’t an option for everyone – poor credit, among other things, can stand in your way – but be sure to avoid predatory lending at all costs, no matter what. If you’re unable to pay your bills without a loan and can’t get a loan from a reliable source, consider seeing a lawyer to find out your options. Bankruptcy may not seem like an appealing option, but the sooner you take on your cycle of debt, the sooner you’ll be free.