What does "predatory lending" entail?

Predatory lending refers specifically to the practice of engaging in unfair, deceptive, or fraudulent practices when providing loans, particularly to vulnerable borrowers. This can include tactics such as misleading borrowers about the true costs of loans, misleading representations regarding the terms, and targeting individuals who may not fully understand the financial commitments they are entering. Predatory lenders often exploit the lack of financial literacy among consumers, leading them into loans that are detrimental to their financial health.

While high-interest rates can certainly be a component of predatory lending, they are not the sole defining characteristic. The core issue lies in the use of deceptive practices that exploit borrowers rather than just the interest rates themselves. Similarly, aggressive debt collection methods and offering incentives can occur in various lending contexts and are not exclusive indicators of predatory lending. Thus, the emphasis is firmly on the unfair and deceptive nature of the practices involved, making it clear why this option is the most accurate representation of predatory lending.