How lenders take advantage of lower income people with mortgage and car loans

Business Week recently reported that a growing range of US businesses are selling high-priced products to people who cannot afford them. Not wanting to be left out of the good times, lenders have joined the party, says Business Week.

In 1989 households earning less than $30,000 a year paid an average annual interest rate on auto loans that was 16.8% higher than the rate paid by those living in households earning more than $90,000. But by 2004, that discrepancy had jumped to 56.1%!

That is, in 2004, people in under $30k per year households paid, on average, 56.1% more than those in households earning more than $90,000!

There was a similarly big jump with mortgage loans, they report.

“It’s not only that the poor are paying more; they are paying a LOT more,” says Sheila Bair, chairman of the Federal Deposit Insurance Company.

For mortgage basics click here.

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