Home Equity Loan Do's
 Beware
of these shady dealings.
While most home equity loan lenders are reputable institutions
operating within the law, you do need to protect yourself from the
abusive lending practices of some unscrupulous lenders. Homeowners
- particularly elderly, minority and those with low incomes or poor
credit - should be careful when borrowing money based on their home
equity. This is because exploitative lenders especially target these
borrowers.
The dishonest lender has a variety of tricks and practices. Avoid
any lender that:
- tells you, or requires you, to falsify information on the loan
application. For example, the lender tells you to say that your
loan is primarily for business purposes when it's not.
- pressures you into applying for a loan or applying for more
money than you need.
- pressures you into accepting monthly payments you can't make.
- fails to provide required loan disclosures or tells you not
to read them.
- misrepresents the kind of credit you're getting. For example,
calling a one-time loan a line of credit.
- promises one set of terms when you apply, and gives you another
set of terms to sign - with no legitimate explanation for the
change.
- tells you to sign blank forms - the lender says they'll fill
them in later.
- says you can't have copies of documents that you've signed.
You should not be charged an excessively high interest rate or fees.
Generally, your closing costs should be 5% of your loan amount or
less and your interest rate should be less than 4% to 6% above the
prime rate. If you think you are being overcharged, you must comparison
shop with more than one lender to make sure that you are not the
victim of an unscrupulous lender.
Here are some things you should never do. Never accept lender recommendations
from home improvement contractors. Never let your lender directly
pay a home improvement contractor. Find your lender by actively
searching for them and never let your lender find you as in the
case of a door-to-door salesman. Never deed your property to anyone
without first consulting an attorney. Never allow the lender or
anyone else to pressure you in any part of the home equity loan
process. Always read the entire loan document and never sign documents
with any blank spaces.
If you have been the victim of a lender, you can file
a complaint.
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