Understanding Credit Card Debt and Predatory Lending

To say "credit cards have ruined our economy" would be a massive overstatement. While credit card debt may have led to the ruin of many relationships, marriages and credit records, it is not entirely responsible for the downfall of our economy. People have been using currency and credit in one form or another since man learned to bargain with each other. Banks and credit card companies simply refined the process of credit-based-bargaining and added interest.

Where the Term "Predatory Lending" Originated

The term "predatory lending" is a very broad term referring to unfair or abusive practices commonly used by credit card companies or other lenders. Unsecured loans in the form payday loans, credit cards or other types of consumer debt with unreasonably high interest rates are a form of predatory lending. Predatory loans are usually backed by expensive collateral like your paycheck, a car or even your home. When you fall behind on your loan payments, the "predators" really profit. Due to the terms of the contract you signed with them, when you fall behind on payments, they may repossess your collateral and sell it. When they sell the collateral, they use the money collected to pay off the loan and the rest is profit.

Some predatory lending techniques include:
* Unjustified risk factor pricing - this is the practice of charging more interest or fees to borrowers the company sees as a credit risk.

* Failure to disclose all terms and conditions - misleading new borrowers and even changing terms after documents have been signed by both parties.

* Short term loans with high fees - payday loans, late fees and overdraft fees. Ultimately, the fees you pay for the short-term convenience they offer works out to be significantly higher than market interest rates.

Personal Finance Advisors and Credit Counseling Services

The Internet is a great source for free personal finance advice and credit counseling services. Personal finance advisors like David Ramsey and Robert Kiyosaki, among others, share information about how they earned their money. They even offer step-by-step instructions for those willing to take a few financial risks in order to improve their financial status. Financial gurus aren't always the answer to every credit problem, but everyone could benefit from what they teach.

Credit counseling services including credit card debt solutions companies can help prioritize your debt. Prioritization and proper financial management go a long way in helping you achieve freedom from credit card debt. Don't continue to pay the predators by simply paying your minimum monthly credit card payments. Most of your payment is going to interest and fees while very little is being done about your premium. Have you ever paid the minimum amount and noticed your balance didn't move or even increased? Interest and hidden fees are designed to keep you indebted to the company.

Always take special care in applying for loans of any type, and remember that convenience is expensive! Acquiring a loan or a credit card for a non-emergency situation is only adding fuel to your already smoldering financial situation. When you feel you are getting in over your head, stop and do something. If you are unsure of your options or would like a financial consultation, check online. Many reputable businesses offer free advice to help you understand your financial situation and crawl out from under that pile of credit card debt.

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