What type of practices are considered predatory lending?

Predatory lending practices are characterized by exploitative tactics that some lenders use to take advantage of borrowers' vulnerabilities. Deceptive loan terms and high fees fall squarely into this category because they often lead borrowers to take loans that they cannot afford, trap them in cycles of debt, or impose unfair financial burdens. Lenders may use language that is confusing or misleading, ultimately obscuring the true nature of the loan. This can include hidden fees, inflated interest rates, or clauses that make it difficult for the borrower to pay off the loan.

In contrast, flexible repayment schedules are generally designed to accommodate borrowers and promote responsible lending. Encouraging borrowers to refinance can also be a standard practice that helps individuals take advantage of better interest rates or terms, provided it is done ethically. Providing loan counseling services is often seen as a supportive measure that helps borrowers make informed decisions about their financial choices, promoting transparency and understanding. Thus, deceptive loan terms and exorbitant fees are specifically what define predatory lending.