16658680040_73af711265_zWhat is “responsible lending”? It’s a term you see often in financial news and blogs, but what does it mean exactly?

It is the exact opposite of what many refer to as “predatory lending.” Those kind of lenders are sneaky, sometimes even illegal, who try and trick people into borrowing money to get them on the hook for a prolonged period of time. Predatory lenders use underhanded tactics like hidden fees and balloon payments so they can sneak up on their own customers and take them for every penny they can.

On the other hand, responsible lenders treat their clients with respect. They are up front about the terms and conditions of the loans, and most of the time will not loan money to someone who can’t afford to repay it. Responsible lenders are men and women who run legitimate businesses and seek to grow that business by doing things the right way, and providing good customer service.

Responsible lenders fight the debt trap. Predatory lenders are the ones who built the debt trap.

How can you tell the difference?

With Smart Borrowing.

Responsible lending is a reflection on the business. That is something you can’t possibly control. What you can control is who you do business with, and we have coined the term Smart Borrowing to demonstrate that in our society, it is YOU who really have all the power.

5339417410_fb2c9ef141_zWhat is Smart Borrowing?

Smart Borrowing is using your common sense, your ability to research, and this wonderful source of information called the internet to take the power back from unscrupulous lenders and make informed decisions about your own finances. Smart Borrowers don’t pay attention to ad campaigns or tv commercials to find a trustworthy business, they dig a little deeper to make sure to select a dependable financial partner when they need a loan.

There are three basic principles at play here, each one critically important and essential to staying money-smart:

Only Take What You Need: Some lenders will offer more than you need in order to get you in the system. Always be cautious, and never EVER borrow more money that you absolutely need. If your power bill is $200, then don’t take $400 even if its offered. The smaller the loan, the easier it is to repay, and the less interest you will have to pay.

Have a Repayment Plan: When you take out a loan, the lender will present you with a repayment schedule. To be a Smart Borrower, you will have already worked out your own plan for repayment. The goal is to get out of debt as quickly as possible, so study your own finances and figure out the best, quickest way to get out of the red and back into the black.

Become a Financial Detective: Thanks to Google, there is world of information at your fingers. Before taking out a loan from anyone, research that company. How long have they been lending? Do they have a favorable rating with the Better Business Bureau? What do their customers think about them? The answers to all of these questions are out there waiting to be found, and its your best interest to find those answers before taking out that loan.

 

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