Predatory lending is an illegal and unethical practice that generally affects women, minorities and the elderly. The reason that some lenders resort to this practice is to pad the costs to the uninformed borrower, thereby adding to their own bottom line.

One sure sign of predatory lending is when terms are changed at the last minute, usually at closing, with the lender claiming they must be accepted for the loan to go through.

It usually takes the form of higher interest rates, higher closing costs or the requirement to purchase expensive insurance from the lender or a recommended broker.

Other forms predatory lending are downright discriminatory, but are not likely to be obvious to the borrower.

The lender can assign or try to steer people with acceptable credit to a sub-prime category, which almost always means higher interest rates and closing costs. As many as half the victims of this practice would qualify for better terms if they shopped around more.

Another version of this practice is when the lender assigns higher costs to certain people based on undisclosed credit policies. This is related to what used to be know as red-lining, where certain racial groups or entire neighborhoods either couldn’t get financing or were always charged higher rates than other with similar financial backgrounds.

A common practice is to require the purchase of single premium credit insurance, which can be much more expensive than other forms, such as annual premiums. Other insurance, such as credit life insurance may be demanded. This practice is illegal and no lender can base its loan on the purchase of insurance, except when the down payment is less than 20%. Even then you are free to shop for the best rates.

Another particularly vicious predatory practice is called loan flipping. The lender will try to convince an existing borrower that the can get a better deal by refinancing. However, in many instances, whatever savings in monthly payments might accrue to the borrower are mainly due to the draining of whatever equity the borrower has.

Predatory lenders prey on fear and ignorance, as well a certain reluctance of many people to raise objections, especially at the last moment when plans have already be made.

Some lenders are actively seeking out those in desperate straits to try to entice into these deals. They may offer to make payments on the loan for a period of time. They don’t, forcing the home into foreclosure.

Or some homeowners will sign over their homes to these people under the mistaken belief that this will save their home from foreclosure. This is, of course, simply the first step towards losing their house.

You must read and understand all paperwork associated with a loan, mortgage or credit card. If you don’t understand something, ask questions and don’t accept answers like: “This is standard practice”; This is the way it’s always done”; Don’t worry about it”; or any similar evasive answer.

If necessary hire a lawyer, go to Legal Aide or to a consumer advocacy group to have them help. Don’t feel pressured or rushed. Learn your rights.

If you are thinking about taking out a mortgage or loan and are not familiar with your rights, do a little research. Federal and state agencies abound that will help you. Just go to your local library or city hall to be steered in the right direction.

Demand that all required documents are sent to you well in advance of closing so you or your representative can review them before you sign on the dotted line. In other words take some time and expend the effort to educate yourself.

Finally, shop around for your mortgage or loan. Don’t go to the finance company down the block. An online search may reveal lenders you have never heard of willing to lend to you on favorable terms.

Once you have comparison offers from different lenders, you will know what your true cost of credit will be.

Self education is the only solution to this problem.