Unfair loans is a global problem but it is a particularly huge cause for concern in Australia. Unfortunately, you may be a victim of irresponsible lending and not even know it. I know, it is shockingly ridiculous but it happens.
The thing to understand is that it is not that people cannot get the loans they are looking for but the lender's irresponsibility caused by poor or complete lack of due diligence has made it so much harder for people to get loans since there are already people stuck with huge debts with no way to reduce them.
It would be very unfair for someone in their nineties to get a five million dollar loan because the lender's records has them earning a couple of hundred thousand a year. Obviously, a man in his nineties cannot be expected to work to pay off that loan. Another example is getting a new home only to realize that you can hardly afford it but cannot rent out the property because it will not be bringing in nearly enough for you to pay off the property and have a little left over. With any luck, you might actually have to go back in your pocket to top up whatever you will get in rental income.
If you have been a victim to a type of irresponsible lending then you should visit Get My Refund as you may have an eligible claim. However, when it comes to irresponsible lending you should be aware of the common pitfalls and how to avoid them in the first place.
So, what can you do to avoid these pitfalls?
The first warning sign to look out for is when the lender is rushing you to sign the paperwork.
Loan documents are complicated documents that contain a lot of legal jargon and vital information in the fine print. You not only need some time to go through it, you would also need some help to break down the 'legalese'. Don't allow a lender to push you into signing anything before you feel good and ready to do so and in case they insist on it.
The second warning sign is if they offer workarounds.
An honest lender will tell you straight if they don't think you can afford to pay back the loan even if it is not the best news you may want to hear. Irresponsible lenders will try to devise workarounds such as adding a third party to the mortgage to create an illusion of higher serviceability.
Another warning sign is a massively inflated interest rate.
All lenders use the risk you present to determine your interest rate and responsible lenders have a cut off point where they deem you too risky and opt out. Irresponsible lenders on the other hand will just keep on raising the rate and make an excuse that it is due to the huge risk you present. However, what they should be telling you is that they suspect that you will default on the loan which will only lead you to spiral into debt.
The final sign is a lender being too fixated on your assets rather than your income.
It is common for lenders to ask you to place an asset as security on your loan. However it should be noted that this should not be the basis upon which they accept your application. The lender will still have to check your income to determine whether or not it is substantial to cover your loan repayments. An irresponsible lender may offer a refinancing plan based solely on the equity you have in assets. This is a sign that they have no interest whatsoever in whether you can actually afford the loan.