What are predatory lending practices?

Predatory lending practices are characterized by targeting vulnerable individuals—such as those with limited financial literacy or poor credit histories—with loan terms that are exploitative and unfair. This can include high-interest rates, hidden fees, and terms that are difficult to understand, ultimately leading borrowers into cycles of debt that are hard to escape.

Essentially, predatory lenders take advantage of the borrower's financial situation and knowledge, often offering loans that may seem appealing on the surface but come with significant risks and burdens. These practices can result in severe financial harm to borrowers, undermining their economic stability.

In contrast, practices that involve low interest rates or fair loan terms align with responsible lending behaviors, promoting the financial well-being of borrowers. Large down payments, while they may pose a barrier for some, do not inherently indicate predatory behavior unless they are combined with other unfair terms aimed at exploiting borrowers.