Wednesday, January 26, 2011

When Creditors are Predators

by Brenda Procter, M.S., state specialist & instructor, Personal Financial Planning, College of Human Environmental Sciences, University of Missouri Extension


Predatory lenders deceive, manipulate, pressure or engage in fraud to get a borrower to take out a loan. A predatory loan has terms that put the borrower at a big disadvantage, and usually has excessive interest rates and hidden terms and costs that the borrower does not understand.


Predatory lending abuses could be found in any kind of institution, but such abuses are often associated with rent-to-own contracts, pawn shops loans, payday loans, subprime mortgages, tax refund anticipation loans, overdraft loans and car title loans. New predatory lenders, including online lenders, are popping up every day.


A few basic signs help you recognize when a lender is using predatory practices. These are some red flags that should make a consumer wary:


• The lender pressures you to accept an offer.

• The lender ignores your questions about loan terms you do not understand.

• You get approved for a loan that is more than you wanted.

• You know you cannot make the payments you have been approved for.

• There are costs in the loan or rental papers you did not know about.

• The lender says you have to buy credit insurance to be approved.

• The loan agreement says you must pay everything back at once instead of in regular, smaller payments.

• You cannot pay off the loan early without a penalty.

• You do not have the right to sue if something goes wrong.

• The interest rate is extremely high.

• The lender asks you to sign blank papers that he or she will finish later.

• The lender keeps pressuring you to refinance and it happens several times a year.

• You were promised your monthly payments would be lower in the future, but instead they are higher.

• You received a call or a letter offering you a loan. This was not information you asked for.


Asking the right questions before agreeing to a loan can help you fully understand what you are committing to. Consider asking questions like these before applying for any kind of loan: 


• What papers or information will I need to apply?

• What fees will I need to pay up front?

• How long will it take to process my application and get me my money?

• What are the total fees I will pay for the loan itself and all related requirements?

• What will be the annual percentage rate (APR) when you include all fees associated with the transaction?

• How much interest will I pay over the life of the loan? Does the interest rate stay the same for the entire loan?

• What will be my monthly or weekly payment?

• Can I make extra payments or pay the loan off early without penalty?

• Will my payments ever increase? If so, why?

• Are there extra fees if I pay late?

• Where do I make my payments?

• How long is the loan?

• Is there a large lump-sum payment at the end of the loan?

• Can I have a copy of a Good Faith Estimate or a written statement with all the fees and loan terms listed?

• How long has your company been in business?

• Who do I contact if I have questions about my loan?

• What agency or office regulates you as a lender?


For pawnshops only:


• How much will you charge for insuring and storing what I am pawning? Are there any other extra fees besides the interest?


Any reputable and honest lender should be more than happy to answer your questions. Their hesitancy to do so is a red flag. If possible, get information from at least three lenders before making a decision to borrow. You may decide that every store’s fees are too high and rethink the loan. Sometimes waiting to spend the money or coming up with it another way may make more sense once you fully understand the costs.


No matter what kind of lender you plan to do business with, learn about your rights, ask lots of questions and take enough time to get the best deal you can when you borrow from them. If it is possible, wait to spend the money and pay yourself (save) a little each paycheck to get the money you need without borrowing.



Center for Responsible Lending Web site,


Freddie Mac Web site, How to Avoid Predatory Lending,


Stop Mortgage Fraud,


Squires, G. Why the Poor Pay More. Praeger Publishers, Westport, CT, 2004.

Thursday, January 13, 2011

Alone Together

Besides being the title of Dave Mason’s debut album (1970; boy am I old), “alone together” is how many a roommate has felt, while sharing a dorm room, apartment, or house while in college.  At the start of a new semester, many students have embarked on new roommate relationships or are planning them for the upcoming school year.  I know this to be true as my youngest son is moving from the residence halls and into an apartment for the fall.  While he was visiting for the holidays, we had a little talk about roommate living – as it is not the same as living at home or in the residence hall.  What are some tips that I can give, given forty years of experience with college students.  (Yes, I started college the same year as Mr. Mason released the aforementioned album.)


A key issue is where you plan to live.  The following questions matter.  Do you need to be close to campus?  Is there adequate transportation, if you live a distance from campus?  Where do you park your car and what does it cost?  Do you prefer a house, an apartment in a house, or an apartment in an apartment complex, as each have a different effect on your expenses and lifestyle?  Once you know the rent, do you know the monthly cost for electricity, gas, cable television, internet, renters’ insurance, and other things?  How do you plan to pay for these items?  I would suggest that you plan to split them equally with a provision that you reconsider the decision, should a member of the group begin to use more than their share – like through the addition of a new, “very close” roommate of a roommate.


A huge item, for many roommate households, is food.  Anyone who has shared housing with others has asked the questions, “Whose food is this?” or “Who ate my food?”   You know that it is costly to eat away from home to excess.  Yet, if you cook your food at the apartment for one person at a time, you lose the economies of size that comes from “family” meal preparation and you face the daunting task of inventory management (aka, “Who ate my food?”).  One practice that works is to share at least one meal a day and to equally share the cost of all the food that comes into the home.  (I am purposely leaving purchased drinks out of this discussion.)  This solves two problems: finances and communication.  First, assume that everyone pays equal shares for all rent and utilities.  Or, if not, the proportions are agreed upon before you sign the contract. Then, whenever a roommate purchases food items, they bring them home and everyone has rights to eat the food, thus negating the “Whose” and “Who” questions.  When something is purchased, the purchaser puts her name on the back of the receipt and places the receipt in the “receipt place”.  (Ours was a beer mug on the top of the refrigerator.)  At the time rent is due; the “manager” totals the receipts by purchaser and adjusts the rent that is due from each person to share the costs for the food.  In this way, if someone takes a larger role in buying food for the group and, perhaps, preparing the group meal, they pay exceedingly less rent and the accounts are balanced each and every month.  This reduces food disputes to zero, particularly if there is a plan for washing the dishes and keeping the place clean.


Why do I recommend eating one meal together?  Eating together helps with the second problem - communication. It is good practice to communicate with your roommates and what better time to communicate than when you are eating – just like home.  There is something special about sitting down and eating together, which is probably why it is so widely practiced by our fellow humans across all cultures.  You can share good stories and you can be honest about matters that are annoying and, hopefully, adjustments can be made that resolve problems before a real battle erupts.  Don’t be mean or critical in these communications and you will not be, if you keep the communication lines open. 


Importantly, you should do your best to establish rules before huge issues infect relationships.  The time that you prefer to rise, retire, eat, study, listen to music, and et cetera can make a huge difference in your successful habitation, as well as your roommates’.  Try to reach some agreement and compromises about such matters before you commit to living together or, if you’ve passed that point, do not be afraid to talk about issues before they magnify. Your individual needs could easily dictate the type of housing that works the best for your mix of individuals.


Naturally, you must be prepared to compromise for the mutual benefit of all and you will be surprised at how different your roommates are, when compared to your family or your perception of what roommates should be, prior to sharing housing.  That being said, your place of residency can have a tremendous effect on your future and your college roommates can still be your friends – forty years later!  All of us in the business of university education have seen the huge difference the place of residency can make on a student’s performance.  While some may benefit from the social/scheduled life of living in a residence hall or social organization, others do exceedingly well when they have control over their time, their study environment, and their sleep hours.  Whichever type of person you are, make choices that support your academic success.  Your academic success is one of the keys to your financial success.  The Cherokee used the word currahee which meant “we stand alone together”.  Similarly, if you succeed alone, we succeed together.