Want to borrow money for yourself? Bring along your common sense. If you don't think things through, you could get scammed and lose money when you need it the most. Here are a few ways to stay away from loan traps.
First of all, don't believe everything you read in a brochure. Look around and compare loan rates and terms. Be especially careful with loans with really low rates. Sometimes the lender gives you a quote for a different type of mortgage product or a teaser rate that will change later.
Find out what your own credit score is. Some companies will scare you into thinking that you have such bad credit that you'd be lucky to get any rate (which, in turn, will make you more amenable to accepting their terms on the loan). No, don't fall for that. Find out your own credit score. You might be surprised, because many of us do better than we think.
Third, don't sign any paper that is missing information or has wrong information. Don't forget that when you sign something, it becomes a legal fact. If you sign a document without all the details filled in, whatever the lender writes will always be used against you. And don't sign something you don't understand.
Fourth, always read over a contract again before you sign it. Some companies are very sneaky and change the interest rates and loan amounts after the deal has been made. Read through the documents to keep this from happening. If there's a mistake and they fix it and leave the room to print a new copy, read it again when they come back. Not just what you changed, but everything. Better to be safe than sorry, right?
Check to make sure that the interest rates and loan amounts add up at the end of the loan. A lender will sometimes try to sneak in a different rate, hoping you won't notice. Check to make sure everything is right.
Don't lie about anything, of course. Fraud can land you in jail. So, if you want to get a loan, don't lie about your income or expenses or give false information about your business. If you get caught, you will have to pay a lot of money. Think prison. You could lose your business licence. Imagine if lawyers were looking into your business and the local paper told you everything they found out.
Another good rule of thumb is to only borrow what you need, not what the salesperson tells you. If someone calls and offers to refinance your mortgage, you should probably say no. Don't refinance if you don't need to. Some shady lenders take advantage of this by charging high fees and offering to refinance your loan every year or more often to make money off of you.
This goes along with another piece of advice: don't let a lender talk you into taking out a bigger loan. Don't borrow more than you can pay back. Don't let any lender ever talk you into a larger loan.
To avoid fraud, you need to know what to look for, ask a lot of questions, and realise that the lender is not your friend. Be friendly, but watch out for danger. Most importantly, be smart.
