Shopping for a loan? You’ll soon notice that some loans are better than others. A few are even predatory.
and can trap unsuspecting consumers in a bad cycle of debt. Below are some tips to help you recognize and steer clear of them.

Be alert for unreasonable interest rates

If a loan offer seems too good to be true, look for a catch. It is worthwhile to do some advance research on rates based on the type of loan you need, your borrowing history, and your credit score. If a loan is offered with rates that are significantly above what your research determines may be right, think twice.

How far above average can rates get? In some of the most extreme examples, payday lenders have been known to charge interest rates as high as 400 percent. However, if a reasonable interest rate for your situation is as low as one to three percent and a lender wants to charge you five to eight percent consider the reason why. Know what fits your individual situation and don’t accept less.

Recognize unclear rates and fees that empty your pockets

Loan rates and fees should be appropriately set and easy to understand. You should be able to research and compare your options so that you know you’re getting the best deal. If you have questions, your lender must be able to respond clearly and accurately without getting defensive or rushing you.

Many predatory loans can also be stuffed with unnecessary features. These include, but are not limited to, inflated fees and charges, loan packing, and balloon payments. These could also include the possibility of loan flipping for a higher interest rate, and risk-based pricing where lenders charge unreasonably inflated rates to high-risk borrowers. In certain situations, these features are appropriate to use. However, they can easily be misused and have been seen as terms in many predatory loans.

Look for strong lender references

Before you commit to a loan, research your lender. The Better Business Bureau or the Nationwide Multistate Licensing System Registry can tell you if your lender has a strong history of service. A basic internet search may also tell you something about your choice for a lender, but it shouldn’t be the only research tool you use.

Loans are complex and what is appropriate for one type of borrower may not work for you. If you aren’t sure what’s best for your situation, enlist the advice of a trusted financial services professional. They can help you make the best financial choice for your future.