Read and translate the text. Consumers may fall prey toloan sharking

Consumers may fall prey to loan sharking. Loan sharks lend money at high, often usurious (illegal) rates of interest. They promise “easy” credit and appeal to people who have problems obtaining and keeping good credit standing.

Usurious loans are illegal under state laws. There are, however, a variety of legal but costly credit arrangements that consumers may want to avoid.

Some creditors call for balloon payments in their agreements. In such agreements, the last payment is much larger than the monthly payments. This may make it difficult for you to make the final payment. Consumers should carefully consider any agreement that calls for a large final payment. Be sure you can save up enough to make this payment.

Another thing to avoid in financing agreements is the acceleration clause. This clause permits the creditor to accelerate the loan, making all future payments due immediately in the event a con­sumer misses a single payment. Most auto sales finance agreements have acceleration clauses. If you miss a payment, you may suddenly owe the creditor the entire amount of the loan. Many cars are repossessed by lenders for this reason.

You should also beware of bill consolidation. This means combining all your debts into a single one. Lenders sometimes claim you can wipe out all your bills by making easy monthly payment to them, which they will distribute to your creditors. However, the consolidation loan may require payments over a longer period of time and at a higher rate of interest. Some lenders also charge a substantial fee for these loans. They may subtract the fee from your monthly payment to them before paying off your creditors, so you wind up falling deeper in debt.

Truth in Lending. To prevent credit abuses, Congress passed the Truth in Lending Act. This law requires creditors to give you certain basic information about the cost of buying on credit. The creditor must tell you – in writing and before you sign a contract – the finance charge and the annual percentage rate. The finance charge is the total amount you pay to use the credit, including interest charges and any other fees. The APR is the percentage cost of credit on a yearly basis.

The law requires creditors to give you special information about variable–rate loans if you are being offered this plan. Remember that with these plans, your payments may increase over time.

The law also requires that consumers be given a copy of the disclosure form containing the credit information. They must also be told the rules and charges for any late payments. Violators can be subject to both civil and criminal penalties, and consumers who sue credi­tors under this act may recover damages, court costs, and attorney’s fees.