UK Accounting Glossary
Predatory lending refers to practices used by certain lenders do to give out loans. With predatory lending, a lender attempts to deceive borrowers by giving them a loan they will most likely not be able to repay. Predatory lending includes tactics such unusually high and hidden fees. Although anybody can be a victim of predatory lending, predatory lenders attempt to target borrowers that will have difficulties understanding complicated terms and conditions, therefore making it easier to deceive them. Lenders benefit from predatory lending by repossessing and then reselling goods put by borrowers as collateral or by collecting on high hidden fees included as part of the loan. Predatory lending can result in foreclosure or significant loss of equity in the case of a mortgage loan. Depending on the situation, predatory lending is not always illegal but many states and agencies have taken actions to inform borrowers about predatory lending to help them recognize and avoid predatory lending tactics.
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This glossary post was last updated: 6th February 2020.