Owning a home has always been considered the American Dream but unless you are extremely wealthy, it is almost impossible to purchase a house with cash. The average person will need to apply for loans for both houses and cars. Some mortgage lending companies, banks and auto dealerships take advantage of consumers by utilizing unethical business practices. Many involve prime and subprime lending abuses that are referred to as predatory lending. The results can be financially disastrous for consumers. There is a way to fight back! The first step is to seek representation from a team of consumer rights protection attorneys with a track record of protecting the rights of clients and looking after their best interests. That is why people in Arizona, California, D.C., Indiana, Maryland, New Mexico, Ohio, Utah and Wisconsin are choosing the legal professionals who are part of the Law Zebra Network* of attorneys.
What are the differences between prime and subprime lending?
The purchase of a home or car are the two biggest investments most people will ever make. In order to make these important purchases, the average consumer will need to apply for a loan. There are two different categories of loans referred to as prime and subprime loans, that everyone should understand in order to protect themselves and make sure they are getting the loan that is best for them.
Prime lending loans are typically given to people with good credit. One of the attractions of prime lending is the borrower is getting the prime rate that banks offer to their better customers. Benefits include very low to no application fees, low interest rates along with reward programs and a variety of benefits. While most banks and mortgage lending companies are honest and upfront with their clients, many others take advantage of borrowers with unethical business practices. For example, if Lender A is offering a $10,000 loan with a prime rate of interest at 4 percent, while Lender B is offering 6 percent, most people are more likely to believe Lender A has the better deal. However, if Lender A charges a $1,000 upfront fee, while Lender B is not charging any fees, the buyer ends up borrowing only $9,000 and will have to pay back $10,000. Some car dealerships will actually increase the price of a car if you choose to finance. One of the biggest mistakes consumers make about prime lending is ignoring the annual percentage rate or APR. Using our example, Lender B’s APR will match the interest rate. Many lenders will charge huge fees and deceive borrowers with a low interest rate. When looking at a prime loan it is important to consider every aspect of the loan and the bottom line. Paying a little less now and a lot later is still more expensive in most cases.
Not everybody has good credit. When it comes time to purchase a home, credit scores are a major factor for securing a mortgage loan. Subprime lending is designed to help prospective buyers with low, damaged or no credit. Subprime lending requires security deposits, application or annual fees along with higher interest rates. These loans fill an important niche inasmuch as they make buying a home or a car possible for people who might not otherwise be able to. Although these loans are easier to attain, they are far more difficult to pay back due to high interest rates and fees. The reality is interest rates and fees have become commodities. Lenders like subprime loans because they are far more profitable. In some cases, they are used by lenders to take advantage of people with bad credit. The most important thing as a consumer is simply to know what your are doing and how much it will cost you. A prime loan is generally cheaper but if it’s not possible a subprime loan may be necessary in order to make the purchase of a car or home a reality.
Are you a victim of unethical prime and subprime lending practices? Contact a Consumer Protection Rights Attorney today.
Not every consumer is aware of the laws designed to protect them from predatory lenders. The lawyers who participate in the Law Zebra Network* are committed to protecting the rights of each client and to fight vigorously to recover their financial damages. To learn more, contact our office today and discover how a consumer protection rights attorney can help.