Home equity loan industry fraught with frauds: FTC

Home equity loans are one of the most popular type of loan facility available today and most people still borrow loans on their homes for purposes like funding a child’s college education or refurbishing the home and other needs. And the reason is not far to seek. Home equity loans offer some of the best terms in the industry – interest rates are still much lower than that for other loans. Because of this, many people are now even borrowing against their homes for holidays or for buying gifts for friends and relatives. I know this sounds ridiculous but that is what happens when you can get a loan for almost negligible interest.

Because this industry is so lucrative and the prospects are mind numbing, you must be especially careful and beware of the many frauds and other problems that are associated with some lenders. This warning is directed especially at people with a bad credit, since they are very vulnerable. And these frauds have bored so deep into the system that the Federal Trade Commission (FTC) was forced to issue a warning to people urging them to be aware of such loan practices. If you don’t take heed, you may end up losing your home, it warned.

I know it sounds scary and you begin to wonder if you could actually trust anybody. But a few simple tricks will ensure that you aren’t conned. When you plan to borrow, try to keep a cool head and find out if the lender you approach is credible. Some lenders try to ‘steal’ your equity by asking you to pad your income in order to qualify for a loan. Why do they do this? Because if you have a bad credit history, it is possible that at some point of time, you will be unable to make your payments. The lender is waiting for just such a moment to foreclose your home and take away your equity. There may be hidden costs associated with the foreclosure or you may be forced to pay exorbitant prepayment penalties. Don’t indulge such lenders and always read the fine print before you sign any documents.