Some lenders and loan brokers charge high fees and high interest rates. Sometimes they cheat their customers. Often, bad loan terms are hidden from consumers. High pressure sales tactics are used to get them to sign. You may hear these practices called "predatory lending" because crooked lenders and loan brokers prey on their victims: trusting consumers.

Predatory lenders look for people with homes who need to borrow money. Then they lend you money even if they know you can?t repay the loan. The lender doesn?t care if you can?t make the loan payments. They take a mortgage on your home when they make the loan, and they plan to take your house through foreclosure when you miss payments.

Before you even apply, beware if:

· Someone calls you on the phone, or comes to your door, to ask you to borrow money.

· You are referred to a lender by a home improvement contractor who wants to repair your home or install siding or a new roof.

· The same lender you already have wants to refinance the loan. They do this because each time you refinance, you are charged high fees for processing and closing the new loan. You may also be charged a penalty for early repayment of the first loan.

When you are applying, beware if:

· A loan broker is involved. A shady loan broker does not try to save you money. He will get you a loan with high costs, just so that he can get a kick back or quick fee. He charges a high fee for making a few phone calls. Sometimes he will falsify your income so that a lender will make the loan.

· The lender urges you to lie about your income or use other false information on the loan application so that you will appear able to make the monthly payments. This is very dangerous for you because it helps you get a loan you can?t afford. You may lose your home when you can?t make the payments.

· The loan broker or lender pressures you into asking for more money than you need.

When you look at the terms of the loan you are being offered, beware if:

· You are being pressured into applying for a loan you do not understand.

· You are being pressured into applying for a loan you can not afford.

· The loan has a high interest rate, or you cannot get a straight answer to what the interest rate will be.

· The loan has high up-front fees and costs, often thousands of dollars, or you cannot get a straight answer to what the fees and costs will be.

· Prepayment penalties are charged if you pay off the loan in the first few years. This is bad because it locks you into a high cost loan.

· You are required to buy credit insurance which will pay off the loan if you die or become disabled. These policies are expensive and often not needed.

· The lender requires one or more co-signors on the loan.

· The loan has a balloon payment. This means the final payment is much, much larger than the regular monthly payments. Usually you will have to get another loan to make the balloon payment. The lender is not required to loan you the money to pay the balloon payment. So you may not be able to borrow the money for the balloon payment when it comes due. You may lose your home then.

At the closing:

· Back out of the loan if the terms of the loan you are asked to sign are different from those first discussed.

· Do not proceed with the loan if the papers you are asked to sign contain blank spaces. Either write "N/A" or "Not Applicable" in every blank, or make the lender fill in the information before you sign.

· Make sure you get a copy of all loan documents you have signed, and keep these in a safe place for at least five years.

· You may change unsecured debt (money lent without mortgaging your home) into secured debt (money lent using your home as security.)

· Remember that many consumer loans or purchases, (for example, credit card charges), are not secured, and don?t directly risk your home.

· Be sure you can really afford the payments before putting your home at risk.

· Mortgage brokers will receive a large fee that you must pay when the loan closes. The lender is not paying them, you are paying them directly or indirectly. This fee can be several thousand dollars. You will also be charged interest on the fee because it increases the amount of your loan. So even if your interest rate is lower than it would have been without a broker, your payments may be higher.

· To avoid paying these large fees, contact several lenders yourself? banks, savings and loan associations, credit unions and mortgage companies-- before dealing with a broker. Look for the lowest up-front fees and costs, such as origination or discount fees, and the lowest interest rate.

APR

· APR stands for the Annual Percentage Rate of the loan. It is stated as a yearly rate. Compare the APR?s when shopping for any loan. The lower the APR, the lower the cost of the loan to you. The APR takes into account not only the interest rate, which is very important, but also any points, mortgage broker fees, and certain other credit charges the lender makes you pay.

· Always ask if the APR is fixed or adjustable. Try to avoid Adjustable Rate Mortgages ("ARM"). Adjustable or variable rate loans usually offer a lower initial interest rate. However, the interest rate will go up when interest rates rise later. When interest rates rise, so do your payments. Payments almost never go down. The maximum and minimum interest rates you will pay must be set forth in the loan papers. They are hard to determine. Get someone to help you analyze the proposed loan before signing.

· "Points" are fees paid to the lender or mortgage broker for the loan. Usually the more points you pay, the lower the interest rate. The problem is that you are borrowing more money to pay the points. Whether it is a good idea to pay points to reduce your interest rate depends on how long you plan to keep the loan. If you do not plan to move for several years, you are probably better off paying points to get a lower interest rate.

· Typically, one point is equal to one percent of the amount you borrow. Ask the lender or broker to tell you the points as a dollar amount. Then, you know how much you are paying.

· There are several other fees added to a home loan that increase the amount you borrow and reduce the cash you actually receive from the loan. Examples include loan origination or underwriting fees, broker fees, and closing costs. Consider all of these costs before you agree to take out a loan. By law, the lender must give you a good faith estimate of these fees before you get to the closing. Some fees may be negotiable. You can always tell them you don?t want the loan.

· Be sure to ask what each fee is for and get an explanation of any fees you do not understand.

? Ask if the insurance premiums will be financed as part of the loan. If so, you'll pay interest and points on these premiums. This will increase the total cost of the loan.

? Find out how much lower your monthly payment would be without the insurance.

? Find out whether the insurance policy has limits on coverage which make it less valuable to you. For instance, don?t buy disability coverage if you have already been diagnosed with an illness that later prevents you from working. The insurance will not make payments for you when you can no longer work because of the pre-existing condition even though you paid for the insurance. Also, read the policy carefully to make sure you are not over the age limit stated in the policy. Otherwise, the insurance company may refuse to pay off the loan when you die even though you paid for the insurance.

! The lender can?t force you to buy credit life, disability, or unemployment insurance.

If your current loan has a prepayment penalty, you will have to pay that penalty when you take out a new loan

? Ask to have all fees explained, and ask questions if you don?t understand something.

? Make sure that all blank spaces are filled in on all copies before you sign.

? Generally, you can cancel the loan within 3 business days of signing. This must be done in writing. The lender is required by law to give you two copies of a "Notice of Right to Cancel" the loan when you go to the closing. One of these copies is for you to cancel the loan by just signing and returning it to the lender within 3 business days of the closing. Talk to a lawyer immediately and follow the instructions on the Notice form.

? Some legal rights to cancel continue beyond the 3 day period. But don?t count on it. Act within 3 days.

? If you have signed a loan you think is a scam or if you are having trouble paying your loan, talk to a lawyer immediately.

Reverse mortgages are useful if you don?t have enough income for a regular loan and if you don?t want to leave the home to your heirs.

They can provide cash to pay off a less favorable loan, to help pay for home health assistants you need to stay in they home but that your insurance doesn?t cover, or to fix your home so you can stay in it.

But they can be expensive, so use caution in dealing with a lender. Costs include an application fee, origination fee, closing costs, monthly service fee and interest. These costs are usually added to the loan balance (what you owe).

How much you can borrow will depend on the age of the youngest borrower, current interest rates plus loan costs and fees, and the property value and equity.

Every place in Louisiana is served by one of the 18 Legal Aid offices. If you need help finding your local office, call one of these numbers:

Acadiana Legal Services (800) 256-1175

Capital Area Legal Services (800) 256-1900

Legal Services of North Louisiana (800) 826-9265

Southeast Louisiana Legal Services (877) 521-6242

If you don?t qualify for free legal aid, the Louisiana State Bar Association can help you find a private attorney who will charge a fee. Call them at 888-503-5747.