2. What are common features of predatory loans? 1. Low interest rates and no fees. 2. Flexible regayment terms and low interest rates. 3. Government backed guarantees and I kw interest r 4. High interest rates and hidden fees

The correct answer is **4. High interest rates and hidden fees.**<br /><br />Predatory loans are designed to take advantage of borrowers by trapping them in a cycle of debt. Here's why the other options are incorrect and a further explanation of predatory loan features:<br /><br />* **1. Low interest rates and no fees:** This is the opposite of a predatory loan. Legitimate, beneficial loans often strive for low rates and minimal fees.<br />* **2. Flexible repayment terms and low interest rates:** Again, flexible repayment terms can be a positive feature of a loan. Combined with low interest, this describes a borrower-friendly loan, not a predatory one.<br />* **3. Government-backed guarantees and low-interest rates:** Government-backed loans (like FHA loans) are typically designed to be affordable and accessible, with safeguards in place to protect borrowers.<br /><br />**Common features of predatory loans:** Besides high interest rates and hidden fees, look for these red flags:<br /><br />* **Excessive fees:** These can be disguised as "application fees," "processing fees," or "prepayment penalties."<br />* **Balloon payments:** A large lump sum due at the end of the loan term, often trapping borrowers into refinancing (and incurring more fees).<br />* **Targeting vulnerable borrowers:** Predatory lenders often target those with poor credit or limited financial understanding.<br />* **Aggressive sales tactics:** High-pressure tactics and misleading information are common.<br />* **Prepayment penalties:** Charging a fee for paying off the loan early, discouraging borrowers from escaping the debt cycle.<br />* **Loan flipping:** Encouraging borrowers to repeatedly refinance their loans, generating more fees for the lender.<br />* **Packing add-ons:** Including unnecessary products or services (like insurance) into the loan, increasing the cost.<br /><br /><br />It's crucial to be aware of these features to avoid falling victim to a predatory loan. If a loan offer seems too good to be true, it probably is. Always read the fine print and compare offers from multiple lenders.<br />