If you’re in the market for a loan, one tactic some unscrupulous lenders use is what’s called “yo-yo financing.”
A yo-yo financing scam happens when a borrower agrees to a loan and signs a contract. But after the contract is signed, a few days or weeks later, the lender will call you and say that your financing wasn’t approved and they no longer can offer you the agreed-upon rate.
The lender will then try to renegotiate the loan or the offer will be completely rescinded. They’ll then offer a new rate that has a much higher rate and higher monthly payments.
The up and down is much like a yo-yo, which is how the scam gets its name.
It is important to be aware of this tactic so you don’t become a victim.
Here are some tips to avoid yo-yo scams:
- Don’t agree to the loan until you’re ready. If you’re not ready for the loan, don’t let the lender pressure you into taking one.
- The Federal Trade Commission advises when getting a loan to ask if the deal is final, and, if the lender says yes, to get it in writing.
- Read the fine print. If you see something that doesn’t look correct, ask the lender to explain it in further detail.
- Don’t be afraid to walk away. If you’re not getting a good feeling from the lender, just leave. It’s better to walk away than to be subjected to a yo-yo scam. You’ll save your valuable time in the process.
If you believe you’ve been a victim of a yo-yo scam, visit the FTC’s website and fill out a complaint form at http://reportfraud.ftc.gov. After submitting a complaint, you may be contacted for more information.
Opinions expressed above are the personal opinions of the author and meant for generic illustration purposes only. RCB Bank, Member FDIC.