Predatory Loans
Definition
Predatory loans are unfair lending practices where lenders take advantage of borrowers through deception, coercion, or exploiting their lack of understanding about loan terms.
Analogy
It's like a wolf in sheep's clothing. The loan might look appealing at first (the sheep), but hidden within it are harmful terms and high interest rates that can harm the borrower (the wolf).
Related terms
Subprime Loans: These are often offered to individuals who have poor credit scores and would not be able to qualify for conventional loans. They typically have higher interest rates because they are considered riskier.
Payday Loans: Short-term, high-cost loans that are typically due on the borrower's next payday. They're known for having extremely high interest rates and fees.
Loan Sharking: The practice of lending money at exorbitantly high interest rates, often illegal.
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