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Published On: Fri, May 6th, 2022

What Rights do Borrowers Have?

As a prospective borrower, your finances will be scrutinized. Loan providers will scrutinize your income, bill payments, transaction histories, and outgoings. Depending on the type of loan and lender, this process can sometimes feel invasive. 

Considering the question, what rights do borrowers have will help you stay empowered during the loan search and application process. Let’s examine some of the more significant borrower rights when interacting with financial lenders and also between potential co-signers. 

What rights do you have as a borrower and how and when should they be invoked? 

pixabay/Mashiro Momo

The Right to Non-discriminatory Lending 

Whilst any financial institution or lending body will ask you to prove your ability to service a loan, there are certain factors which fall outside of their permitted jurisdiction of inquiry and decision making. 

The Equal Credit Opportunity Act provides for borrower’s rights in relation to loan applications. Under the Act, it’s prohibited to discriminate against a borrower on the basis of income derived from any public assistance program, and on their age, within certain proscribed circumstances. 

Furthermore, it’s prohibited to disfavor granting credit on the basis of any identifying features such as a person’s race, color, religion, sex, marital status, or place of origin. 

The Act also confers on the borrower the good faith exercise of any rights under the Consumer Protection Act. With all these protections in mind, a prospective debtor can keep a keen eye on the information requested by any potential lenders and the ways in which they are seen to use this information. Where a loan is denied, the Act also requires creditor transparency on the reasons for their decision. 

The Right to Share 

Often the larger loans in life are shared responsibilities, a mortgage between spouses, and a car loan between partners. However, co-signing a loan is not as straightforward as you may think, and bestows certain rights and responsibilities on both parties. 

In the case of a student loan for example, if a borrower’s individual credit rating is not strong enough to secure the loan on their own, they may request a family member or friend to co-sign. In doing so, the co-signer needs to be aware that the primary borrower’s behavior can affect their own credit rating. If the borrower defaults on the loan this will appear on the co-signer’s financial statements and can negatively impact their credit rating. 

If co-signing a mortgage, it’s essential that the co-signee understand that their signature on the contracts does not provide them with any title or ownership claims. Whether you’re considering becoming a co-signer or enlisting one, click here to get tailored advice from a market-leading platform. 

The Right to Refusal 

Just as any lender can refuse a loan applicant on the basis of financial conditions, a borrower also has the right to shop around to secure the most suitable loan. 

This is an essential right to exercise as the credit industry is not without its fraudulent players, and predatory lending is an unfortunate reality. Predatory lending is an offence subject to criminal prosecution and remediation for the victims. As always in life, the best defense is offence, in this instance financial education and advocacy. Employing the services of a housing or credit counselor is a great way to ensure you’re receiving impartial advice on any potential loan providers. 

You can also avoid falling into the trap of predatory lending by educating yourself on fraudulent financial practices. Potential signifiers of predatory lending to keep an eye out for include, aggressive soliciting, pressure to re-finance, exorbitant fees, balloon payments, and consolidating debt plans that expose you to greater risk by setting your home up as collateral. 

As you can see, in response to the question of what rights do borrowers have? the answer is many! If you’re considering borrowing, do your homework and consider employing a professional to help you understand your rights on a loan. 

Author: Amara Etter

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