Predatory Lending.
In plain English
Predatory lending is any lending practice that uses unfair, deceptive, or abusive terms to profit at the borrower's expense. Common signs include very high interest rates, hidden or padded fees, balloon payments you cannot afford, and loans approved without checking whether you can actually repay. The aim is often to keep you borrowing and paying fees, not to help you. Products frequently linked to predatory tactics include some title loans, payday loans, and rent-to-own deals, where the true yearly cost, the annual percentage rate (APR), can reach triple digits.
01Why it matters
Predatory loans are built to keep you stuck, and a single bad one can drain hundreds of dollars in fees or cost you your car, so spotting the warning signs before you sign protects both your money and your assets.
02The math, step by step
You need $500 fast and a storefront offers a quick loan secured by your car title. Title loans commonly carry a finance fee of about 25% a month, which works out to a typical APR of roughly 300%, according to the FTC and CFPB. Because the loan is structured to be hard to repay in one short term, you roll it over, pay more fees, and risk losing the car. A small-dollar loan from a credit union or a payday alternative loan usually costs far less. Hiding the total cost and rushing the signature are both marks of a predatory deal.
03What this is NOT
Not every expensive loan is predatory. A higher rate can simply reflect higher risk. Predatory lending is defined by deception and abuse: hidden terms, lending without regard to whether you can repay, and structures designed to trap you. The harm comes from the tactics, not just the price.
04Receipts
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Plain-English answers from our glossary. Receipts included. Never advice.
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