Loans have high risk
Realtor Lori Naese calls it the worst kind of loan.
It’s the kind structured so that, if the mortgage-holder doesn’t refinance by a certain date, he or she will be locked in at some extraordinary interest rate, to the extent that a $1,000 monthly payment soars to $1,800 overnight.
That’s because few of the borrowers using those kinds of predatory loan instruments are able to qualify for refinancing, especially as credit has tightened and the number of foreclosures mounts.
“I know several families that this has happened to,” says Naese payday advances. “They have really struggled.”
Holders of the aforementioned loans — in addition to the near-doubling of their mortgage payment — also lose big in the fee structure of the default financing.
“When that day hits for these families, you’d have to be a millionaire just to afford the fees,” she said. “I’ve seen a case where the fees ate up all of the $11,000 the owners had in equity in their house.”