Article: There are a few common bad practices to keep your eye out for, and lenders are more likely to try these practices on someone with bad credit. A few examples are outlined below. Loan Flipping involves repeated encouragement to refinance your loan, and borrow more money each time. Refinancing comes with fees and increases your interest rate. Insurance Packing is the policy of adding unnecessary insurance, such as credit insurance, to your loan. Bait and Switch is a tactic used by lenders to offer a set of terms, and then push higher charges right before you sign the paperwork. If your lender tries to change the loan terms on you last minute, don't fall for it. Equity Stripping is when a lender offers you a loan that is solely based on the value of your home and not on your ability to repay. This is an attempt to have you default on your loan and forfeit your property. To avoid this, look at your finances and be sure you can confidently pay each monthly payment. Because your house is being held as the source of collateral, defaulting on a home equity loan can put your home in danger. Before you decide to open either of these types of loans, be sure you can pay the borrowed money back. Don't borrow more than you can repay. This is the easiest way to lose your house to a lender. Some home equity loans will punish you for paying ahead of schedule. This means that, even if you are able to pay off your debt earlier than expected, you may not be able to. If there is a distinct possibility of paying your debt ahead of schedule, consider negotiating the prepayment penalties out of the contract. If for some reason you realize you have made a mistake, and less than three days have passed since the contract was signed, you can legally cancel the contract. You have until midnight on the third business day to cancel the transaction, starting on the day you sign the credit contract. You can only cancel if you are using your principal home as collateral. If you decide to cancel, you must tell the lender in writing.

What is a summary?
Be careful for deceptive lenders. Recognize the consequences of defaulting. Check for prepayment penalties. Know the Three-Day Cancellation Rule.