debt

Loan payoff feels like rip-off

Don Taylorq_v2.gifDear Dr. Don,
Recently, I went to get a loan payoff -- it was like an act of Congress to get it.

I borrowed $33,000 several years ago. When I got the payoff amount, it was more than the actual loan. I have been paying $523 per month on this loan for at least four years. The payments were supposed to drop as time goes on. Last year, they dropped to $504 a month.

The payments are killing me. I cannot seem to get an honest answer from the company that gave me the loan. I want a personal loan to pay them off. Should I seek a lawyer? Where can I get an honest personal loan? Please help me.
-- Barbara Bemoans

a_v2.gifDear Barbara,
When a loan balance grows larger with time, it's usually because of negative amortization. That means your loan payments weren't big enough to cover the interest expense, and the shortage was added to the loan amount.

It's very hard to find a lender willing to provide an unsecured loan, outside of credit card agreements, because the typical borrower looking for this type of loan has bad credit and the lender is unwilling to accept the credit risk.

I suggest discussing your loan with your state's banking commissioner. The Conference of State Bank Supervisors has a directory of state banking department links. That office will be able to tell you if there's something actionable concerning the loan agreement. Odds are, however, that there isn't anything illegal about the loan agreement.

The best reason to contact an attorney is if you're considering filing for bankruptcy. I don't know enough about your financial situation to know if that makes sense for you, but a bankruptcy attorney can provide you with that advice.

Bankrate's content, including the guidance of its advice-and-expert columns and this Web site, is intended only to assist you with financial decisions. The content is broad in scope and does not consider your personal financial situation. Bankrate recommends that you seek the advice of advisers who are fully aware of your individual circumstances before making any final decisions or implementing any financial strategy. Please remember that your use of this Web site is governed by Bankrate's Terms of Use.

Read more Dr. Don columns for additional personal finance advice. To ask a question of Dr. Don, go to the "Ask the Experts" page and select one of these topics: "Financing a home," "Saving & Investing" or "Money."

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