6 smart moves to avoid predatory lenders

House on sheet of bills

You need to be particularly careful when looking for a home equity loan.

This kind of lending attracts more than its share of schemers and crooks who are literally out to steal your home with misleading sales pitches and scandalous contracts full of hidden terms and fees.

There are plenty of honest banks and finance companies with reasonable terms and fair prices. You can find many of them, and what they're charging, on our home equity rate comparison charts.

Use that, and our six moves for smart borrowing, and you'll land a great loan from a reputable lender.

Smart move 1. Ignore anyone who knocks on your door, or calls on the phone, with a pushy, high-pressure sales pitch. Legitimate lenders don't do that. Predatory lenders do.

They often target elderly, immigrant and lower-income homeowners with little financial experience and who are least likely to know they're being conned.

Smart move 2. Don't fall for "special deals" that promise bigger loans and lower monthly payments than other lenders. Predatory lenders aren't worried about your ability to repay. They want you to default so that they can foreclose and seize your house.

Their contracts usually allow them to repeatedly raise the interest rate on your loan, pushing the monthly payments beyond what you can afford. As soon as you miss a payment, you're hit with an avalanche of fees and charges that drive your payments ever higher until you default and lose your home.

Smart move 3. Never deed your property over to anyone. Legitimate lenders never ask you to sign over the title to your house. Anyone who does, and promises to return the title when the loan is repaid, is lying. They intend to keep it.

Smart move 4. Refuse to sign any documents until you've read and understand them. It's critical to check the fine print for damaging terms the salesman deliberately failed to disclose.

If you're asked to sign a document that has blank spaces to be filled in later, cancel the deal and walk away. No reputable lender would ask you to do that.

Smart move 5. Walk away from loans that requires you to buy credit insurance or other "extras." They offer little value while dramatically increasing your monthly payments and risk of default.

Smart move 6. Never use a lender recommended by a contractor or landscaper who wants to do work on your home. You may not be dealing with a legitimate workman, but with a front man working for crooked lenders.

The lender will charge you fees and claim to pay the amount you borrowed directly to the fake contractor. The contractor does a shoddy job or no job at all and disappears.

The lender says that's your problem. You're still on the hook to repay the loan and if you don't, it will foreclose on your house.