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Volume 3 Issue 5May 2012
How To Avoid The Predatory Loan Trap 

Borrowing money in this economy is not easy. But even if you are desperate to get a loan, don't let your guard down. Predator creditors are on the loose.

These unscrupulous lenders prey on borrowers using deceit, manipulation, sales pressure and even fraud to get them to sign on the dotted line.

The hallmarks of a predatory loan are exploitation and entrapment: These sky-high interest loans target consumers who have little ability to repay the loan, such as the elderly, people with limited education, those with weak credit histories and other low-income groups, according to the Durham, N.C.-based Center for Responsible Lending, a nonprofit research group.

While predatory lending is often associated with payday loans and subprime mortgages, the practice can be found with any loan. And new schemes are cropping up every day -- online and off.




 Casey and Toni Brown

Casey and Toni Brown


Choctaw Tribal Members, Casey and Toni Brown each used their CAB accounts to save for their business, CT Investments, LLC.  They each saved $2,000 and recieved $4000 in matching funds from CAB, giving them a total of $12,000 to fund their new business. "The most important lesson we learned is that no matter your financial situation, you can still save money.  During our time we saved in the CAB program, we had to prioritize our spending.  There were months that we didn't think we would be able to save, but we just had to decide on what was most important to us.  I am thankful that we learned the principle of saving money during our participation in CAB," said Casey.


Four Alternatives To Payday Lending 

The recession drags on, and many consumers facing financial emergencies are looking for quick cash. For years, payday lending -- in which borrowers get small loans to tide them over until the next payday -- has been a popular option.

Currently, there are about 22,000 storefront payday loan stores nationwide, according to the Consumer Federation of America in Washington, D.C. On average, the industry makes $40 billion in loans and collects $6 billion in finance charges from borrowers each year.

But taking out a payday loan isn't necessarily a smart financial move for the borrower.

"A payday loan doesn't solve a financial crisis; it creates one," says Uriah King, senior policy associate at the Center for Responsible Lending in Durham, N.C. "The typical payday borrower ends up in a debt trap because they have to go back and get another payday loan to help repay the first one, then another, then another."

As the payday lending industry becomes more tightly regulated and industry opponents publicize its shortcomings, consumers may wonder what alternative options are available.

Fortunately, there are other ways to get quick cash. 

CAB Coach Questions


Ten Bad Habits That Lead to Debt Disaster

Sometimes the only way to stop a snowballing problem is to go back to the top of the hill and find out what started it.

If you're up to your eyeballs in credit card debt, take a step back and recount your money missteps. Knowing your weaknesses could prevent you from falling back into the bad credit pit and show you a way out.

According to Gail Cunningham, senior director of public relations for the National Foundation for Credit Counseling based in Silver Spring, Md., consumers mired in debt make common financial blunders, most of which can be prevented with discipline and behavior changes. Learn from these mistakes and start paying off your debt.

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In This Issue
How To Avoid The Predatory Loan Trap
CAB Client Spotlight
Four Alternatives to Payday Lending
Ten Bad Habits That Lead To Debt Disaster
When Debt Can Be Good For You

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When Debt Can Be Good For You 

The idea might make some shudder: Debt can be good? Believe it or not, it is actually good to have certain types of debt in your financial portfolio, assuming you are comfortable with owing money. Why? Because it is through debt that you can acquire assets such as housing, automobiles and other types of property. In short, the strategic use of good debt can improve your finances and help you achieve your dreams and goals.

However, beware, as debt falls into three categories -- the good, the bad and the ugly. Ugly debt and bad debt, of course, will do the opposite of what good debt can do for you.