An insurance policy often sold to subprime borrowers and financed in the loan. The insurance is used if the borrower dies, becomes disabled or unemployed. Brokers often push credit insurance because it includes a large commission for them since some lending companies are affiliated with insurance companies. Lenders say balloon loans allow borrowers to get loans at lower monthly costs than they would otherwise be able to. This is especially appealing to borrowers who expect their income to increase or expect to be able to refinance a loan within a few years.
Lenders make loans that refinance existing loans in an effort to pocket more fees.
Loans that include a payment schedule that results in an increase in the principal balance. Fees that are charged if a loans is paid off more quickly than planned. Loans that allow for the interest rate to go up or down depending on economic conditions. These loans start at a lower interest rate, but can often go up after a year. These enable borrowers who expect their income to increase to get loans they may not otherwise afford.