What is a key issue with predatory lending practices?

Predatory lending practices are characterized by imposing unfair or deceptive terms on borrowers, which can lead to severe financial consequences for the individuals involved. These practices often include high-interest rates, hidden fees, and complicated terms that are not clearly disclosed to the borrower. This lack of transparency makes it difficult for borrowers to understand the true cost of the loan and can result in them becoming trapped in a cycle of debt, as they struggle to meet the burden of the unfair terms.

This issue is particularly pronounced in situations where lenders exploit vulnerable populations, leading to further financial instability for borrowers. Understanding these aspects is critical in financial literacy, as it highlights the importance of recognizing and avoiding lending practices that can harm individuals financially.