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   Wednesday, September 5, 2007

Shockingly, federal law does not define predatory lending. When it comes to protection from abusive lenders, don't count on your good old Uncle Sam for help. Nope. You're own your own in that department. It's you versus the mega-bankers in the dog-eat-dog financial arena. Sadly, in that environment with no protective rules, it's the big dog that almost always wins.
The best way not to lose that fight is to get informed. Know the big dog's tactics and protect yourself from them in advance.
Here are three tactics that I've seen that fall within my definition of predatory lending:
1. Automatic Refinancing.
There are lenders who are providing a valuable resource with automatic refinancing, and there are lenders who are taking advantage of borrowers through automatic refinancing. In principle, automatic refinancing is a great service to the borrower; the lender continually monitors interest rates and will automatically refinance the loan for the borrower if rates drop enough to make the refinance worthwhile. The problem arises in the definition of worthwhile.
It is not a secret that lenders charge fees every time they process a mortgage loan. Sometimes these fees are paid for by the borrower at loan closing, other times these fees are added to the outstanding balance of the loan: the fees are financed. It is those fees that can get very expensive.
Suppose you have a mortgage with an outstanding balance of $200,000. Your lender has monitored interest rates and informs you that rates have dropped almost 1/2 percentage point and you could save $20 per month by refinancing. Let's further say that you will not have to pay anything at loan closing, the fees can be added to the loan. Just come into the office and sign the papers. On first look, this seems like a good deal to you. However, the fees that are added to your loan can be substantial. How many points are you paying? What other fees are being added? What will your new loan balance be? In this example, it is likely to be around $206,000.
Automatically refinance like this a few times each year, and your loan balance could increase as fast or faster than your home appreciates. When you sell your home in a few years, you could end up getting back less than your down payment. All the appreciation would have been eaten by the fees every time you refinanced. In this example, the lender pocketed thousands and thousands of dollars in fees, and you lost much of your equity. Beware.
2. Packing Extras Into The Loan.
Would you buy a car from a dealer that tried to sell you tires at 4 times the going price? It is doubtful. Yet, thousands of people each day do the financial equivalent by refinancing their mortgage with a lender that tries to sell them insurance at 4 times the going rate or even more.
Credit life insurance, or loan life insurance, or any other name that unscrupulous lenders dream up is nothing more than a simple term life insurance policy. Don't let lenders talk you into an insurance policy associated with your mortgage loan if that same policy can be purchased separately for 1/4th the cost. Usually, lenders that try to foist this overpriced policy on borrowers will offer it at the time of loan closing. This is done on purpose so that the borrower can comparison shop. You should ALWAYS shop for price comparisons.
3. Charging Excessive Fees.
We've covered excessive fees somewhat in the first item. However, excessive fees can be applied to any fee associated with a mortgage loan.
Let's say the average national APR for a fixed, 30-year mortgage on the day you apply is 6.34% with one point. You find a lender that is offering 6.20% with one and a half points. Turning to your handy mortgage calculator, you find your payments will be less with the loan from the latter. What the mortgage calculator cannot tell you is that the latter loan is likely going to be much more expensive.
Lenders that offer below market rates as teasers are not doing it out of the kindness of their heart. You can bet they will try to get a profit in some other way. In the instance just described, appraisal fees, attorney fees, loan processing fees, documentation fees, credit report fees, and more can all be inflated to cover the cost of the lower interest rate. Additionally, a prepayment penalty can be included in the fine print giving the lender even more profit when you sell your home or refinance.
Borrower beware.
Christine Carter is a widely recognized mortgage refinancing expert. Through her website http://e-z-mortgage-refinancing.com she has helped countless numbers of borrowers get the best loan offer available on both purchase and refinance loans.


Credit Score is Important When Buying a Car
Do you check your credit score and credit report before you go shopping for a car? You might find out that it is well worth your while to do so, as some auto dealers are taking advantage of the fact that many consumers do not know their credit scores.
No one likes buying a car; the entire process is awkward and cumbersome. Most items we buy are plainly marked with the price, but with cars, the price is often a mystery. Then you have to haggle with a salesman and hope that you have worked out the best price possible. Having done that, you have to arrange financing. You can often get an acceptable interest rate when financing through the dealer, but some dealers are padding their bottom line by offering loans at higher rates than they otherwise might.
The scam works like this - You negotiate your best price with the dealer and you agree to finance through them. You fill out the credit application and hand it over to the salesman, who has promised you some reasonable terms. He takes off to process the application and to check your credit report while you have a cup of coffee. He returns a few minutes later, shaking his head. He informs you that your credit score is only 600 and that you will not qualify for the interest rate he offered you. He says that you will have to pay a higher rate. And not knowing any better, you agree.
Had you done your homework by checking your credit score ahead of time, you would have known your actual credit score and you could have pointed out that the salesman's assessment of your credit score was incorrect. At that point, you could insist upon receiving the more favorable interest rate or threaten to finance elsewhere. This is a common scam that works because most people really do not know their exact credit score.
Learning your credit score is easy. All you have to do is visit the Websites of one of the three major credit bureaus - Experian, Trans Union or Equifax. For a modest fee, you can receive a copy of your credit report with your credit score. Armed with this useful piece of information, you can shop for a car with a bit more peace of mind, knowing ahead of time whether or not you can qualify for the best financing.

©Copyright 2006 by Retro Marketing. Charles Essmeier is the owner of Retro Marketing, a firm devoted to informational Websites, including LemonLawHelp.net, a site devoted to information regarding lemon laws for automobiles.


How to Compare Credit Cards
When you are shopping for a new credit card, it is very important to compare what each has to offer. It can be a little bit tricky, however to decide which is the right card for you. You would be well advised to carefully go over the terms and conditions for each card that you are considering before applying.

Some things are easy to spot. Cards will be advertised as having 0% APR for a certain period or no annual fees. However, it is easy to miss some of the other details that should be considered.
Take your liability on fraud, for example. The ads may say you have zero liability, but typically you have to meet certain terms to qualify for it. Otherwise, you may have a limited amount of liability.

That 0% APR or low APR probably has some terms too. You want to know what happens if you are late with a payment. Sure, your credit may be excellent and you've never been late with a payment yet, but things happen. It's not impossible to have a payment arrive late due to events beyond your control. In fact, many cards say that even if your payment arrives on the due date, but after a certain time (often 1 p.m.), your payment still counts as late. Not only do most cards charge you a late payment fee, your APR will probably skyrocket. Know what you're getting into if things don't go quite as planned in your life.

You may never need it, but you should pay attention to the APR of cash advances as well. These are often significantly higher than the APR of purchases using that same card, and the interest has no grace period; that is, it is charged from the day you take the cash advance.

If a rewards card catches your interest, compare what you get from the various companies. One company may offer airline miles with a particular airline while another may allow you to choose the airline. Interest rates and annual fees for rewards cards will vary as well.

Take a look at the grace period offered for each card. You want to know how soon you will need to pay back the money before you are charged interest. If you are clever with your cards, there are companies where a purchase may go as long as 45 days before you need to pay it back or pay interest. That's a pretty good length of time to use the money!

There are all kinds of fees to watch out for. It's pretty easy to find a good credit card with no annual fee, but sometimes it is worth it to pay an annual fee for a good credit card. However, you also need to be aware of late payment fees, over limit fees, cash advance fees, setup fees and any other fees. These things can add up if you aren't careful.

No company will tell you your exact limit without processing an application from you. They may give you an approximation, however, then finalize it when they approve your application. Just because you get an offer saying the company is offering you a $10,000 credit limit doesn't mean they are actually going to give it to you. Read the fine print and you will see that these limits are subject to approval and may change.
Taking a little time as you decide which credit card is right for you might save you a lot of money and trouble in the long run. Don't apply for a credit card just because you like the ad. Apply because it meets your needs. Stephanie Foster built Know Your Credit Cards as a resource for people wanting to make the right decision when signing up for a new credit card. You can get more information about credit cards at her website.