In recent months I have spoken personally with two people who have been on the verge of becoming victims of loan sharks for students. And you will tell me and what you eat, well let me explain. This term in English is known as Predatory Lending or abusive financing practices (which in good Spanish are usury).


Your future could end up in the trash

business loan

Normally this term is used to describe the practice of selling loans with too high rates or interests, sale of unnecessary financial products, payment of benefits for those who sell the loan, etc. The kind of things we see in pay day loans or at the worst moment before the mortgage crisis. Not what we hope to see when thinking about the university education of our young people.

Unfortunately this is what has been happening with college loans. And the worst of all is that with these loans, you can end up paying many times more than the amount you borrowed, without having a limit on the amount of penalties or charges that can be charged to you and unlike all other types of loans, without have the protection of bankruptcy.

Let me give you some tips on how to protect yourself against these abusive loans:

Let me give you some tips on how to protect yourself against these abusive loans:

  1. Educate yourself as to the different types of educational loans that are available to you, they are many and very different. Education is your best weapon.
  2. Educate yourself about abusive financing practices in such a way that you can recognize them.
  3. Beware of loans where you only pay interest for a while and after that time you have to pay the rest at once.
  4. Federal loans have fixed and lower interest rates, but beware of the companies that are going to offer you extra money to refinance that type of loan, this is a big deal for them and the worst thing that can happen to you.
  5. Ask them to give you the percentage of interest on the loan in writing. The offices of “financial aid” in many universities do not even mention the percentage of interest on the loans.
  6. If the university gives you a list of lenders with which they prefer to work, investigate how do these companies choose? In many states, authorities have found that lenders pay universities for being on these lists.
  7. When applying for a loan, compare different companies and ask them to give you in writing the percentage of interest and the total that you are going to pay so that you can compare correctly.
  8. Choose only loans with a fixed interest rate. Loans with variable interest are only good for the bank. The interests are in one of the lowest points historically speaking, from here the interests only go pa’arriba.
  9. Finally never sign something that you do not understand fully. Take your time, it is not $ 5 what you are borrowing, in reality it is all your future that is at stake. Read and understand the entire document before signing it. Do not let them rush you to sign something you do not understand.