A predatory lender, often called a loan shark, uses abusive or unfair practices to dupe and intimidate a borrower. You can recognize predatory loans by the financial penalties they impose for late repayment. These can include astronomical origination fee charges and even higher interest rates. Also, predatory lenders often hide or misrepresent the loan terms, and frequently approve loans they know you will have trouble repaying. They usually charge a ridiculously high interest rate that only desperate borrowers would consider. Here is a rundown of the seven worst signs of predatory lending: Four-digit interest rates: We’ve seldom seen a payday loan with an APR below 200%, and rates of 400% to 800% are common. Once rates exceed 1,000%, it becomes difficult to treat the loan as anything other than predatory. The highest APR we’ve seen so far was 2,200%. Make sure you read and understand a loan agreement before signing it. Don’t be confused by monthly interest rates masquerading as annual rates — APRs are the only way to compare different loans with each other. Astronomical interest rates can lead to a cycle of debt that is hard to escape. Often, the exit off this crazy train is bankruptcy. Additional costly services: Be on the lookout for items you don’t need, like credit insurance. Some lenders will push these added items, even making the loan contingent upon accepting the extras. Extra fees for bad credit borrowers: Your low credit score may affect your ability to get a loan, but it should not trigger extra fees. Watch out for the old bait-and-switch, where the payday loan lender claims at the last minute that you don’t qualify for the loan you wanted, instead steering you to a costlier product with higher fees. To combat this type of abuse, know your credit score and credit report contents before applying for a loan. Asking for collateral: Payday loans are predicated on your ability to repay the loan in full when you next get paid. Asking for collateral, a practice that the Federal Trade Commission calls equity stripping, should not be part of the equation, and can simply be a way for the lender to strip you of your home or car. If you want to use collateral, you’d be better off seeking a home equity loan or cash-out vehicle refinancing loan, both of which will charge much less interest. Whenever you post property for a secured personal loan or payday loan, you run the devastating risk of losing a vital asset. The bum’s rush: Your spidey sense should tingle whenever a lender tries to rush you through the paperwork. It’s your right to read through the loan agreement and any associated documents before affixing your signature. Doing so helps you understand whether you can afford the loan and to uncover any terms in conflict with the lender’s verbal representations. When lenders hurry you to sign, they may be trying to cover up unfair terms and undisclosed fees. Also, be careful when the lender asks you to sign a second set of documents because they may have terms that differ from the original. Don’t allow critical fields to be left blank, as the lender may go back afterward and fill them in to modify the agreement. Foul rollovers: Many payday loan borrowers roll over their loans because they can’t repay them on time. Typically, payday lenders charge a fee for rollovers. But be on the lookout for higher interest rates when you renew the loan. Sure, a 400% APR is bad enough, but 1,200% or 2,400% are ridiculous. They can become a one-way ticket to destitution and a rendezvous with a bankruptcy judge. The big lie: Outright lying is the absolute proof of a loan scam. This may be accompanied by pressure to sign a loan agreement without being shown the legally mandated loan disclosures. It’s equally crooked for a lender to ask you to lie on your loan application form to help win loan approval. For example, the lender may ask you to invent income you don’t really have. You are aiding and abetting fraud if you go along with these purposeful misrepresentations, and that may land you in a world of trouble.