When looking for a home equity loan, there are good deals and there are deals that are just not meant to see the light of day. Unfortunately, many people end up taking up home loans that sound too good to be true only to end up paying the ultimate price much later on.
No matter how dire the situation is when you are shopping for a home loan, there are some signs that should send up red flags that you should never ignore. Here are several signs that you should say no to the presented home loan terms.
- Deals that come to you through the mail, telemarketing or fax. In many cases, these deals are scams.
- Home improvement contractors who are too willing to financing the work on your home.
- Home equity deals that have no clear and precise paperwork.
- Deals that are rushed through and are easy to get.
These are just a few of the simple telltale signs that a home loan deal is too good and may actually be a problem later on. Aside from these signs, here are several other things you should be on the lookout for when you shop around for home loans.
Loans that are being flipped
Loan flipping happens when a broker talks you into refinancing your existing home loan for no real benefits. Brokers will tell you that the new terms are more favourable in the long run, but they will fail to mention that there are fees and penalties to be paid before everything is set. These charges might end up putting in you in further debt.
Added on products
Every type of loan has some form of insurance that you must pay for as the loaned. There are also other products that can be added on in the name of making your loan more secure. Each lender has a different set of add on products that the customer can take on if they so wish. As soon as you come across a loan agreement that is forcing you to pay for extra products you do not need, say no to that home loan. You will only end up spending more money on things you do not need.
Loans with abusive prepayment terms
The longer you take to repay your loan, the more money the lender makes. Most loans have penalties attached to prepayments. It’s usually a small penalty such as a few months’ worth of interest, nothing too serious. Some, however, make it impossible for you to repay your loan early. Terms that forbid you from prepaying until the loan is in its fourth year or those that require six months’ worth of interest as a penalty should be avoided at all costs.
Remember, the lender is out to make money. No matter how sweet they might be talking, it is their own interest that they put first. It is up to you to choose carefully and find a home loan that serves your own interests as well.Tags: home loans to avoid, how to know bad home loans, how to spot bad home loans