| Shopping for a subprime loan |
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Fishbein agrees, "It is only through getting
a range of different offers that a borrower can get a sense of what
the market is like, and what the variation in the market is like."
And don't act in desperation. "Don't call any phone number
listed on a telephone pole," says Taylor.
Instead, stick with the names you know. While you
still have to keep up your guard, you'll eliminate a lot of potential
problems.
Subprime credit cards, often marketed to help consumers
build up a positive credit history, are a particular problem, says
Taylor.
"There are a lot of fly-by-night cards out there
from fly-by-night companies," he says. "If you haven't
heard of the bank, don't get the card. Even if you have heard of
the bank, remember the card may have application fees, as well as
onerous annual fees as well as security deposits."
If you use a mortgage broker, don't count on that as your only
source of information. Even though brokers can offer loans from
several lenders, they aren't required to give you the lowest rate
they find and may collect commissions from the lenders, Fishbein
says.
Also beware of any lenders who are soliciting you, says Taylor.
"You should presume that if you're in the subprime marketplace
that you have a target on your back."
The smartest move, he says, is to do your own shopping. Use some
of the online sites to see what kind of rates you can get. "Educate
yourself," he says. "Somebody wants your business."
At the same time, make sure you're not giving lenders permission
to pull your credit records until you're ready.
Before you sign anything
How badly do you really need the money? If you're reading this,
the answer is probably pretty badly. But step back from the problem
for a minute.
If the money is to pay a creditor, is it practical
to make a payment arrangement yourself or have a legitimate nonprofit
credit counseling service work one out for you? By dealing with
the original problem, you're not digging your hole a little deeper,
says Fox.
You might also have other borrowing options. For a smaller amount,
some employers will advance money against the next paycheck, which
is a better option than a payday lender.
If you're looking for a few thousand to fix up your
home and live in a certain area or fit a particular demographic,
sometimes community housing groups can make loans or grants, says
Garcia.
Other similar groups will help with counseling services
or work with banks to secure loans for first-time buyers, says Ira
Rheingold, executive director of the National
Association of Consumer Advocates.
That counseling could also make you eligible for certain government-sponsored
loans, says Garcia. "Sometimes people don't realize they have
resources available to them," she says.
But you have to be careful, too. Sometimes con artists
will try to impersonate these groups. How to tell the difference:
Find the organization through a source you recognize, such as your
bank, credit union, local municipality or national housing group,
like the Center
for Responsible Lending. And watch your wallet. If you're getting
hit with fees and charges upfront while being promised loans or
access to loans, that's not a good bet.
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