Home Equity Loans: Avoiding Fraudulent Practices

There are many scam artists eager to prey on unsuspecting borrowers. Don’t be one of them.

You can avoid the devastating effects of fraudulent lending practices by following the basic guidelines offered by the Federal Trade Commission:

DO NOT

  • Enter into a home equity loan if you have insufficient income to support it.
  • Sign any papers you haven’t read or any documents that have vacant spaces that are to be filled in after you sign them.
  • Allow anyone to pressure you into endorsing any document you don’t understand.
  • Agree to a loan that contains unwarranted credit insurance or other charges you don’t want.
  • Allow the promise of extra cash or lower payments cloud your good judgment about whether or not a loan is really worthwhile.
  • Deed your property to anyone. Consult an attorney or someone else you trust before considering this risky action.

DO

  • Request specific information if credit insurance is a mandatory condition of your loan. If credit insurance is not required and you don’t want it, and if there has been a fee added to the loan, ask that the charge be removed from the loan text. If you do want some sort credit insurance, take the time to shop around for the best rates and terms.
  • Maintain careful records of what you’ve paid, incorporating billing statements and canceled checks. Question any charge you suspect is inaccurate.
  • Check contractor’s references before you start work on your home.
  • Read and review all items carefully. In the case that you need any terms or conditions explained, talk to someone you can trust first. Weigh and consider all the costs of financing before you agree to a loan.

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