What is loan flipping?

What is loan flipping?

• A. A method of consolidating loans
• B. A predatory lending technique that involves coaxing borrowers to refinance their loans repeatedly
• C. A strategy for reducing interest rates
• D. A process for increasing property values

Answer: (B)

Loan flipping refers to a predatory lending practice where borrowers are encouraged or pressured to refinance their existing loans repeatedly. This technique is often used by lenders to benefit from transaction fees and higher rates that come with each new loan, rather than genuinely helping borrowers improve their financial situations. In this context, borrowers might find themselves in a cycle where they are taking out new loans to pay off previous ones, often without a real improvement in terms or conditions. This can lead to increased debt, as fees and costs accumulate with each refinancing. Understanding the predatory nature of this practice is crucial for consumers to be aware of their rights and the potential risks associated with refinancing loans repeatedly.

Loan flipping refers to a predatory lending practice where borrowers are encouraged or pressured to refinance their existing loans repeatedly. This technique is often used by lenders to benefit from transaction fees and higher rates that come with each new loan, rather than genuinely helping borrowers improve their financial situations.

In this context, borrowers might find themselves in a cycle where they are taking out new loans to pay off previous ones, often without a real improvement in terms or conditions. This can lead to increased debt, as fees and costs accumulate with each refinancing. Understanding the predatory nature of this practice is crucial for consumers to be aware of their rights and the potential risks associated with refinancing loans repeatedly.