What Are Predatory Lending Practices?

There are many types of predatory lending practice. However, the following are most common:

1. Flipping: It is a process in which a creditor encourages a consumer to refinance a loan several times in a relatively short period of time, each time adding higher points and fees.

2. Packing. It involves adding fees to a new loan for services such as credit insurance or adding the borrower’s old debt into the new loan. this tactic gets its name from the fact that lenders “pack” old debt into new loans, which can make it more difficult for borrowers to repay them.

3. Stripping. It refers to the practice of basing the terms of a loan on a borrower’s equity in his or her home, rather than on the borrower’s ability to repay the debt. Eventually, foreclosure and sale of the property occurs, and the money derived from the equity is stripped from the homeowners and goes to the creditor in repayment.

4. Also, a predatory lending includes when home improvement contractors go door-to-door, seeking to induce people to take out mortgages to pay for home improvements. Most of the times, the consumers can be unaware of the facts that they were subjected to predatory lending


  1. It is really best to consult those of licenses than of those who just walk through your doorsteps. Prevention is better than cure. It is best that you know more about what you are getting into rather than finding a way to get out.

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