If I pledge my home as security for a consumer loan, what dangers do I face?
If you own a home it is likely to be your greatest single asset. Unfortunately, if you agree to a loan that is based on the equity which you have in your house, you are putting your most valuable asset at risk. You should be careful because certain abusive or exploitive lenders (commonly called "predatory lenders") target home owners (particularly the elderly, minorities, low income persons and those with poor credit ratings). Although there are many reputable lenders, the past few years have seen an increase in the "fringe credit market."
How can I protect myself against home equity scams?
To protect yourself against losing your home:
* agree to buy something on the spot because the lender says it might not be available later,
* agree to a home equity loan if you can't afford the monthly payments,
* sign any document that you haven't read or which has blank spaces,
* let anyone pressure you into signing anything,
* agree to a loan that includes credit insurance that you don't want,
* let promises of extra to cash or lower payments cloud your judgment,
* deed your property to anyone,
* sign loan paperwork before receiving the TILA disclosures (interest rates, monthly payments, etc.) and Real Estate Settlement Procedures Act (RESPA) settlement sheet (details closing costs) and fully understand them).
What can a bill collector do to me if I fall behind on a debt?
If you fall behind on your payments for a purchase or to repay a loan, your bill collector may:
- Contact you in writing, by phone or otherwise to demand payment, accept partial payment, re-negotiate the terms of payment, threaten legal actions, etc.
- Turn your account over to a collection agency
- Repossess the goods which you are purchasing or other goods in your possession which you pledged as collateral, if the creditor has a security interest in the goods, or
- Bring a lawsuit against you seeking the amount owed plus the costs of the suit; usually including attorney fees.