How do predatory loans typically differ from conventional loans?

How do predatory loans typically differ from conventional loans?

• A. They have lower interest rates and fewer fees
• B. They often feature high-interest rates and additional fees
• C. They are regulated by federal law
• D. They require no credit history

Answer: (B)

Predatory loans typically differ from conventional loans in that they often feature high-interest rates and additional fees. This is a hallmark of predatory lending practices, where lenders target vulnerable borrowers or those with less negotiating power and impose loan terms that are much more burdensome than standard loans. In contrast to conventional loans, which generally aim to provide fair and reasonable terms based on the borrower's creditworthiness and financial situation, predatory loans exploit borrowers' circumstances. This can include exorbitant interest rates that far exceed the market average, as well as hidden fees that can significantly increase the overall cost of the loan, making it difficult for the borrower to keep up with repayments. The other options describe characteristics that do not align with the nature of predatory loans. For example, predatory loans are often unregulated or inadequately regulated rather than being well-governed by federal law. They can also require varying credit histories, as predatory lenders may not always disregard creditworthiness entirely. Thus, understanding these key differences highlights the predatory aspects that can lead to financial distress for borrowers.

Predatory loans typically differ from conventional loans in that they often feature high-interest rates and additional fees. This is a hallmark of predatory lending practices, where lenders target vulnerable borrowers or those with less negotiating power and impose loan terms that are much more burdensome than standard loans.

In contrast to conventional loans, which generally aim to provide fair and reasonable terms based on the borrower's creditworthiness and financial situation, predatory loans exploit borrowers' circumstances. This can include exorbitant interest rates that far exceed the market average, as well as hidden fees that can significantly increase the overall cost of the loan, making it difficult for the borrower to keep up with repayments.

The other options describe characteristics that do not align with the nature of predatory loans. For example, predatory loans are often unregulated or inadequately regulated rather than being well-governed by federal law. They can also require varying credit histories, as predatory lenders may not always disregard creditworthiness entirely. Thus, understanding these key differences highlights the predatory aspects that can lead to financial distress for borrowers.