What Is A Home Equity Loan?

To get a loan, the lender usually requires that you give some guarantee that you will pay the loan back. For a home equity loan, you secure the loan with your home. Typically a home equity loan works like a credit card. It provides you with a revolving credit account that includes a line of credit and a series of checks to access the line. What Is Home Equity Lending Fraud?

Home equity lending fraud is different than other types of fraud. Here, unscrupulous lenders seek you out, often by phone or visiting you at home unannounced. They trick you into taking a loan against the equity in your home at unusually high interest rates and fees. These lenders offer the loan to you whether you can pay for it or not. If you don't make your payments, the lender can take your home.

IF YOU DON'T PAY YOUR LOAN, YOU CAN LOSE YOUR HOME!

When you fall behind on your payments, the lender can take your home and your equity through a legal process called foreclosure. The lender then owns your home. At this point, it is nearly impossible to get your home back.

How to Protect Yourself

The best protection against home equity fraud is to be an educated consumer. Don't be afraid to ask other people for advice. And watch out for these red flags:

1. Documents with blank spaces (e.g., The lender gives you papers to sign and the date or the loan amount is left blank).
2. Door-to-door salesmen offering you easy credit. No reputable lender lends money to "anyone regardless of credit."
3. Offers of debt consolidation. While such offers may seem attractive at first, they can turn out to be a very costly "convenience" (e.g., the lender offers to pay off your credit card bills and your medical bills with the home equity loan).
4. Excessively high interest rates.
5. Excessive prepayment penalties (e.g., the loan contract with a fixed interest rate which requires that you pay a large penalty if you repay the loan early).