What is a predatory loan?

A predatory loan is characterized by unfair, deceptive, or fraudulent practices that often leave borrowers in a worse financial situation than before. These loans typically come with terms that are excessively high-interest rates, hidden fees, or excessively punitive conditions for non-payment or late payment. As such, they can "strangle" borrowers financially, making it very difficult to pay back the money borrowed without incurring additional debt or financial hardship. This predatory nature exploits the vulnerabilities of borrowers, often targeting those with limited financial literacy or access to better lending options.

In contrast, flexible repayment options, no credit checks, or loans with no fees or charges do not encompass the essence of a predatory loan. Such elements can sometimes indicate more favorable lending practices rather than exploitative ones. Therefore, the defining feature of a predatory loan is indeed the presence of unfair terms that profoundly impact the borrower's financial stability.