Home Equity Fraud Prevention
Learn from a trusted lender how to prevent home equity fraud
The more you know about home loan fraud, the better protected you can be against it. Home equity fraud occurs when scam artists draft binding loan agreements that contain hidden fees, excessive interest rates and other unusual terms that can affect your ability to pay. There are two common scams:
Disreputable lenders create unfair loan terms and coerce applicants to sign by convincing them there's no better alternative.
- Underhanded home contractors promise to sell you a loan to finance a repair. Generally, this loan carries an extremely high interest rate and is only issued after the contractor is well into the project. When you ultimately can't pay the high payments, the contractor leaves the work unfinished, you default on the loan, and risk losing your home.
What to look for to prevent home equity fraud
Home loan fraud can happen to anyone, and most of the time, it's the result of not carefully reading all of the information in the loan documentation. Here are some red flags to look for so you can protect your home equity:
Excessive fine print: Most loan documents have fine print, but disreputable lenders will hide unfair rates and fees in the fine print under the assumption that you won't bother to read that section. Be on the lookout for loans with unclear language and an unusual amount of fine print. Your lawyer or accountant will be able to tell you if a loan looks legitimate.
Unusual interest rates: These lenders will also create loans that earn them an exorbitant amount of interest; you may even see rates as high as 50% if you look hard enough in the fine print. To mask that, they may first offer a 'teaser rate' or low up-front rate, and then raise the rate later in your term to exceptional levels. Be sure you read and understand all interest rates cited in the loan agreement to catch these tricks.
Promises of no income or credit check: If the 'lender' seems unconcerned with you paying back the loan, that's probably because they're prepared to make money off of you when you default.
Discrepancies between the APR and stated rate: If the APR, or annual percentage rate, is significantly higher than the promised rate, there may be hidden interest charges you need to be aware of. APR was created to measure the 'real loan cost' in order to prevent hidden fees from being charged. Therefore, if the APR is significantly higher than the advertised rate of interest, look for other fees, and take the time to check these rates against competitors.
Mysterious lenders: If you can't determine who the lender is or find an office for the company, it could very well be a scam.
Prevent home equity fraud with a financial advisor
The best home equity fraud prevention is to carefully read and understand any loan offers you're considering, and compare them to offers from other institutions. If you're unclear on what you're reading, you could consider having a lawyer or a home loan advisor look over all your papers. They can advise you best for your individual situation and let you know if anything in the documents seems incorrect or meant to cause you financial harm. Here are some other good ideas for home equity fraud prevention:
Get a sense of how large a loan you need and can qualify for. Do your homework first to figure out how much you need to borrow for the purchase you're looking to make and what the going interest rates are. Then, solicit a quote from a trusted lender like Citizens Bank.
- Obtain your loan from a certified trusted lender like Citizens Bank. You can be assured of our integrity and forthright lending practices whether you already have a relationship with Citizens Bank or are a new customer.
The best way to prevent home equity fraud is to bank with a trusted lender
Citizens Bank is a trusted lender of home equity loans and home equity lines of credit. We will provide you with a Truth-in-Lending Statement and promise to be clear about fees and payment structure up front. Consult a home loan advisor from Citizens Bank to determine what's best for your personal finances at 1-800-340-LOAN. You can also start your home equity loan application online if you're ready to go.