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Back-to-School Strategies for Staying Out of Debt

Will Changes in Credit Reporting Affect You?

What to do if your medical bills are turned over to collections

What to do if your spouse can't pay his or her bills

What to do when a family member ruins your credit

Homeownership is possible

What you need to know about the IRS and collection agencies

Will being turned down for a store credit card hurt my credit?

Beware of credit repair

Debt Management versus Debt Settlement

How to get ahead of late fees

Is There a Service That Helps You Not Pay Bills

Is a Debt Owed

Patience is the key to furnishing a new home

How to split expenses with your partner

Will my boyfriend's bad credit affect me?

Tax filing options to consider

What to do if your account is turned over to collections

Celebrating Valentine's Day on a budget

Personal Credit and Starting a Business

Finding Money to Reduce Your Debt and Improve Your Credit

Simple Keys to Personal Finance

Be vigilant to avoid telephone and internet scams

Debt Settlement

Understanding credit utilization

Setting New Year's goals that you can keep

The pros and cons of skipping a payment

Strategies for Financially Surviving the Holidays

Creating a fun and memorable holiday on a budget

Keep an open line of communication with parents about their finances.

Make a Choice to Get Ahead Financially

What to do when a relative asks you for money

Should You Buy a Home Now or Wait?

The difference between debt settlement and debt management

Tax Refund Delays for some in 2017

The negative impact of paying a payment 30 days late

Stressed by Finances

How to navigate two significant financial decisions: starting a family and buying a home

How to advise someone close to you who is coming into a significant amount of money

Make a Conscious Decision on How to Spend Your Money

Tips for Back-to-School Shopping

How do you know if you have a good credit score?

Americans spend more money eating out than on groceries

Having Good Credit Saves You Money

Developing good money habits with your first job

How to save for a home

How to Know if you are Ready for Home Ownership

When is the right time to buy a home?

You can improve your credit to buy a home

Plan a Memorable Vacation Without Incurring Debt

The Hidden Costs of Payday Loans

Be Wary of Credit Repair Services

Use Caution when playing the credit card game

What does it mean to say bankruptcy gives you a clean slate?

How your credit is affected by various debt options

Be wary of predatory small business loans

What to do if you fall behind on mortgage payments

Financing a College Education

Money, Credit and Relationships

Should you be concerned with your date's credit scores?

Best options for a small, short-term loan

How to help a relative who is always borrowing money from you

Setting New Year's goals that you can keep

Making the holidays memorable for families on a tight budget.

Skipping a Payment over the Holidays

What to do if you are overwhelmed by medical bills

Make your financial intention a financial goal you can achieve

Should Consumers Use the New EMV Cards?

What to do when a collector calls you

The difference between paying bills and managing your money

My wife and I have gone through some tough financial times, which eventually led us to file for bankruptcy.  Following this experience, I don’t ever want to use credit again, but my wife

What do I need to know to pay ahead on my mortgage?

What to do if you get an unsolicited credit card in the mail

What to do when moving in to share expenses doesn't work out

Be wary of predatory small business loans

Q. I own a small business and frequently receive fliers from capital companies telling me I'm eligible for loans up to $100,000. One even stated that the fee was as low as 15% of the loan amount. My financial institution always wants so much documentation from me that I'm seriously thinking of taking out one of these loans. Are they as good of a deal that they appear to be?

A. You certainly aren’t the first business owner to be intrigued by these kinds of loan offers. Unfortunately, they reflect the old adage that if something appears too good to be true, it probably is. In fact, the loan you’re describing is typically what I consider predatory.  Capital companies can get away with predatory practices because the federal government doesn’t regulate these kinds of loans.

In many cases, the terms in these offers are far different than what is advertised, so you must be careful not to be lured in by what can end up to be misleading terms and conditions. In the offer you mentioned with fees as low as 15% of the loan, for example, it might appear that you’re getting the deal of a lifetime. But a 15% fee is not the same thing as an annual percentage rate of 15%.  In actuality, the fine print can reveal that a loan like you’re describing has an annual percentage rate of over 100%. 

Unfortunately, small business owners across the country are finding out how detrimental some of these loans are.  Some small business owners even find themselves in a position where they are unable to make the high loan payments, and end up closing their business as a result. 

To protect yourself against predatory loans, never sign a contract without reading all the terms.  Also, be sure to look at the Annual Percentage Rate, or APR, regardless of the length of the loan. (Short-term loans can appear to be a good deal, but may come with outrageous APRs.) If the loan documents don’t reveal the APR, then don’t sign them.  In addition to knowing the APR of any loan you take, you need to know the monthly payment required.  As a business owner, you will want to ensure that your cash flow allows you to make the new loan payments. 

It’s far safer to seek loans from a bank or credit union.  Though the amount of documentation can seem rigorous, your bank or credit union wants to ensure that your loan is good for you—and them.  In other words, they want to make sure you are able to make the payments.

It wasn’t that long ago that predatory lenders harmed many people in the mortgage market. It seems the trend is moving more toward small business owners. As a business owner, you put your heart and soul into your business. Protect that investment by being aware of potential predatory loans.

Bonnie Spain is the executive director of the American Center for Credit Education and Consumer Credit Counseling Service of the Black Hills. For more information, email acce@acce-online.com.

The material in this transmission is provided for personal, non-commercial, educational, and informational purposes only. ACCE makes no representations or warranties with respect to the accuracy or completeness of the contents of this transmission and assumes no responsibility for errors, inaccuracies, omissions, or any inconsistency herein. You should consult a professional where appropriate.