Sell the Monthly Payment. They encourage consumers to pay off credit card, retail and motor vehicle debt by consolidating them all into one home loan and promise to reduce the monthly debt payment. Monthly payments can be lowered this way but the problem lies in the fact that the consumer is trading short term debt for long term debt. Instead of paying off consumer credit bills in 3 to 4 years, the new consolidation loan will take 15 to 30 years to pay off. And the total amount paid out in interest will be much greater.
Predatory lenders love to sell loans based on the monthly payment.
Consumers must look beyond the monthly payment and analyze all the terms of the loan if they want to avoid being victimized. Another way for a predatory lender to reduce the monthly payment on a home loan is to have the borrower pay off only the accrued interest each month. This method of financing will result in a huge balloon payment at the end of the repayment term, usually after 15 years. The borrower, who believes he is paying down the loan after making all the payments, is in for an unpleasant surprise. He may owe almost as much as he originally borrowed 15 years earlier.