How to Avoid Lender Fraud

Fraud is by no means a new word, and a lot of people deal with fraud in one way or another at some point. Lenders also feel the effects of fraud when it comes to commercial lending and fraud can have a big influence on the market and lending in general. Fraud can come in many different ways when it comes to lending.

There are governing bodies that fight against lender fraud, but unfortunately it can exist. Lending practices that seem to strip away the equity from business owners who have commercial loans can greatly influence the business and the profitability of it. There are many financial burdens that can be the result of lender fraud, so in order to avoid being a victim there are things that you as a business owner should look for when you are going to apply for a commercial loan. Avoiding lender fraud as a business owner means avoiding questionable acts of the lenders, scams or other practices that the lender is doing that do not seem right. Predatory lender fraud is a commonly heard term that refers to lenders who prey on business owners who really need the commercial lending and although they are able to give out a commercial loan, they often do it to great expenses of the business owner. If you think that you may have been the victim of lender fraud you may want to consider asking yourself the following questions:
1. Were you encouraged or did your commercial lender encourage you to provide fraudulent or false information on your loan application?
2. Were you asked by your commercial lender to leave any signature lines blank on your commercial loan application, or were you asked to leave any other important areas blank on your loan application in which the lender could go in and alter or change the information?

If you believe that either of the above situations may have occurred, you could be experiencing lender fraud. There are other not so apparent ways that lenders can commit fraud that include:
• Leaving any disclosure areas out of your loan documents, or omitting important disclosures
• If your commercial loan has been refinanced many times and instead of your monthly payment going down, it seems to be increased every time
• If any of your documents with your commercial loan state that your interest rate could be calculated on a daily basis instead of a monthly basis if you are even one day late on your payment or if there are extreme penalties for making pre-payments or paying more than the principal amount
• If the amount of your commercial loan is more than the value of the property and its fixtures
• Any unexpected costs that were incurred at the time of the loan that were not explained in full to you at the time of your application
• If the monthly payments on your commercial loan were a lot higher than you expected once the payments started on the loan

These are a few examples of how lender fraud can occur and things that you should watch out for when you are going to apply for a commercial loan. There are regulations and rules in effect to protect you from commercial lender fraud, but you also need to be aware of some of the ways it can occur to help protect yourself and your business.