'Advance Fee' Loans: Be Afraid, Very Afraid by Courtney Ronan
You've been dreaming of building that extension on the house for several years. And despite lots of number-crunching and saving, it appears you won't be able to achieve that dream without a loan. That's an option which certainly makes sense. You want to select a contractor who's reputable, and chances are good you're probably going to spend a bit more on the project than you initially anticipated -- because you get what you pay for, and because you're probably going to be tempted to upgrade materials and amenities as you go along. In your excitement to get the job started soon, you may find yourself seeking a quick fix to obtaining your loan. Unfortunately, too many homeowners fall victim to a telemarketing scam that's sweeping the country. The last chapter of the story is always the same: The homeowner loses his or her savings to a con artist, pushing that dream even further out of reach. So what's the scam? Some telemarketers call or send "spam" e-mails to consumers and offer to help homeowners obtain the loans they need in exchange for an "up-front" fee. Sound too good to be true? It is. Consumer advocates repeat until they're blue in the face that we should never, ever pay money up front for a service. The rule of thumb is: See the goods, then pay if and only if we're satisfied. In fact, the mere request that consumers pay up front for a loan is illegal. The law dictates that consumers must have the loan in their possession for a minimum of seven days before any payment is given to the creditor. The big lesson here, however, is that you shouldn't accept a home loan from a telemarketer or from an online creditor. If you encounter any difficulties along the way, how will you resolve them with an anonymous e-mailer or an out-of-state organization? It's far more preferable to obtain your loan through a reputable bank or credit union in your hometown. And remember that a sign out front of the financial institution doesn't necessary mean that it's licensed by a state or federal agency. Ask if the lender is licensed, and then verify that information on your own. How many times each day do we hear those advertisements that guarantee loans regardless of consumers' credit history? You've been careful with your credit. Do you really want to do business with an institution whose standards are so relaxed? While some consumers land on hard times and damage their credit histories, the fact of the matter is that one's credit history is a fairly reliable indicator of your ability to repay a loan. A reputable bank or other financial institution won't do business with a consumer whose credit history is poor, period. Once you've selected a bank or credit union, you've met with a representative, and you've been approved for a loan, don't sign anything until you get all of the terms in writing. Verbal agreements don't hold water, especially when it comes to your finances. Make sure that the document you're reviewing contains in graphic detail the terms of your repayment -- in particular, your interest rates (which, by the way, are a competitive point of difference among financial institutions, so make sure you do a little comparison shopping before you select a bank or credit union). It's true that obtaining a co-signer can result in a lower interest rate for you. But is it worth it? That depends. If for any reason you default on the loan, you'll be taking your family member's or friend's credit down with your own. A frank, open discussion between you and your prospective co-signer -- before you sign anything -- is a good idea. Play devil's advocate, and discuss what will happen if you default on your loan. Can you assure your co-signer beyond a doubt that you will be fully responsible for the loan's repayment, and that you're confident in your ability to repay it? If and when you've passed all of the above-listed "checks," then you're ready to sign the contract, obtain your loan and achieve every homeowner's dream. As with so many other financial commitments we encounter in life, it's well worth your while to approach home loans cautiously. Take your time. You've waited this long to begin work on your home's extension. The best favor you can do yourself is to select a reputable creditor. Loans are a fact of life, and if you choose a creditor wisely and repay your loan in a timely manner, you'll boost your credit and pave the way for any future endeavors for which you need financial assistance. |
