Don't make these 5 mistakes when you Refinance or Borrow money

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Don't make these 5 mistakes when you Refinance or Borrow money
2 years ago
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During a recession, many people find that they need to refinance their homes, consolidate their credit card debt or take on additional debt to tide them over rough spots. Though they may feel pressured by the economic downturn, this is no time to rush into a financial agreement that may cost them more than they realize.

It's hard enough to find a reputable lender in good financial times. Now that the economy is faltering and we're in a recession, it's even harder to find one who won't try to take advantage of the bad times to give you a bad loan. You need to do your homework and make sure that the lender you choose has your interests at heart, as well as their own. Before you sign anything, go over this checklist to make sure that there aren't any hidden dangers in the agreements you're negotiating.

Ask yourself these questions:

1. Is the agreement written clearly in language a normally intelligent person can understand? Is there any fine print, gobbledygook or vague phrasing that you don't understand or can't read well? If so, put down your pen, step away from the document and ask for a copy to run by your lawyer before you sign anything. If the lender balks or the agreement is just too poorly written, find another lender.

2. Has the lender fully explained what your costs will be and are they in writing? A vague reference to what you'll have to pay isn't acceptable. Neither is it a good sign if the lender keeps talking about how much you're saving or what a good interest rate you got every time you bring the subject of costs up. Get it in writing and get it explained or get another lender.

3. Did you find the lender in a mailing that you didn't send for? Is the offer from some company whose name isn't familiar to you? Do they promise you the moon in the mailing with very little hard data to show what the loan will cost or what their rate will be for someone in your circumstances? If your credit rating isn't perfect, the rate they claim you'll pay may be much lower than the one they offer you down the line.

4. At the signing, do they keep rushing you to sign instead of letting you take the time to read the contract? This is a very bad sign. So is a loan officer who tells you that you "don't need to read it right now", because you DO need to read anything before you sign it. That's just commonsense and anyone who tries to prevent you from doing that has something in the contract that they don't want you to read. You can bet on it.

5. Finally, are there checks from you to other companies clipped or stapled to the contract? While there may be times when payment for appraisal or a title search or something simliar may be included in a contract, this should all be explained and agreed upon beforehand. Charges that you weren't expecting should never be "bundled" with loan agreements. This is, if nothing else, a very shoddy way to do business. You should always know who you're paying and why you're paying them before you put your signature on a check.

If you believe that the loan company you're dealing with is trying to cheat you or pull a bait and switch, the best thing to do is contact your state's attorney general's office. They'll probably want copies of the paperwork, so send them, but keep copies for yourself also.

Just because there's a recession is no reason to ignore the basics when you look for a loan. You want the lowest possible rate, the fewest fees and the shortest length of repayment that you can get based on your credit score. Stick with reputable lenders and don't fall for anything that sounds too good to be true. As you know, anything that sounds too good to be true, probably is.

By Elizabeth Langford (PinkHat)
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