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"Doing Nothing Changes Nothing"

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10/27/2011
James R. Brown
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Prepayment Penalty is a Red Flag of a Predatory Loan

Would you ever think you would be punished for paying of your loan early? A "prepayment penalty" requires you to pay a steep fee before refinancing your home. The penalty period can last several years and cost thousands of dollars. For you, as the borrower, this fee "adds to the cost of credit." This is because if your financial situation improves, you won't be allowed to refinance your loan at a better rate.

As a St. Louis bankruptcy lawyer, I can tell you that a prepayment penalty can increase your odds of foreclosure as well. According to a study, consumers with prepayment penalties of less than three years had a 15 percent higher rate of foreclosure. With three years or more, the numbers increased to 20 percent. You want to make sure you are paying for the loan for the actual length of time you use it. A penalty period can last several years and may cost you thousands of dollars.

If you have been a victim of a predatory loan that has drained your equity and pushed you into foreclosure, you may not need a St. Louis bankruptcy lawyer. What you do need is the right information for your situation. Before you speak to an attorney, creditors, or sign any forms you need to read my book, "Get Out of Debt: Secrets Your Creditors Don't Want You to Know," it's completely FREE. 


Category: General

James R. Brown
President and Principal Attorney at Castle Law Office

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