Generally, people who want loan desperately will be a victim to a bad loan. Therefore, people who go to the lender for a loan have to be cautious enough about the bad loan warning signs and be prepared not to walk, but run away from the spot and from any lender who exhibits the following suspicious actions.
Manipulate Some Numbers
The lender will try to convince you for a bigger loan, if the income digits are manipulated. Do not deal with such lenders because it is a crime and it could get you slapped with precipitous penalties or even jailed.
Stresses You into a Bigger Loan
Be cautious of any lender who stresses you into borrowing more money than you need. You will end up paying more interest on the extra cash. So, switch to what you want and never agree for more funds.
Do Not Consider Your Monthly Income
You will be the right person to know your own accounts. Never give the discretion to the lender to decide on your income. Rather figure out whether you have sufficient money coming in to cover all your utility bills, any other monthly bills, a new mortgage and a savings account for any emergencies.
Understand what is required and stick to it. Never agree to a lender, who pressurizes you into a bad loan with monthly payments, which you know you cannot afford. Stay away from such lenders.
If your monthly outflow is more than your inflow, you will find yourself in distress.
Documents Kept at Bay
A lender has to provide you with all the required loan disclosures. In case he fails to do it and tells not to read them, then you have to be cautious. The law says that the lenders have a commitment to tell you the APR (Annual Percentage Rate) and provide a GFE (Good Faith Estimate), which is an itemized list of estimated closing costs within 3 days after you apply.
The APR comprises of not just the interest rate, but also certain credit charges, points and broker fees. The GFE covers all these charges and you will be asked to pay everything else at the point of settlement. One has to use these documents while approaching for loan.
Documents Exchanged Against Original
If a lender has offered you one set of terms while applying for the loan and a different set of terms during closing, ensure you demand an explanation.
When the lender tries to pressurize you to sign these new documents with unfavourable terms and worse rates, beware – it could be a scam and take your next step elsewhere.
Thus, one should understand the warning signs of a bad loan and identify a genuine lender for applying a loan.