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Lenders target riskier borrowers in Massachusetts

Across the United States and Massachusetts, some lenders are discovering that their margins being tightened. This realization has turned some lenders to target riskier clientele when making loans or credit extensions. Getting a new line of credit may be a useful financial tool, it can also lead to significant debt for the borrower and debt can easily spiral out of control. Handling finances can be extremely difficult if credit card bills are unmanageable. High bills might lead to significant interest charges and the inability to get out of debt.

According to the Wall Street Journal, lenders increased their targeting of riskier borrowers by issuing 3.7 million cards to subprime borrowers in the first quarter of 2014. With high levels of dissemination in the market for lending, credit lending operations have turned to markets that offer credit lines to individuals who are at risk of defaulting. The average rate of return for subprime customers was 21.1% in comparison to 12.9% for prime borrowers.

Lending to individuals with high debt is an attractive opportunity for some predatory lending operations that thrive on high returns by using extravagant interest rates. The same cannot be said for the lenders' prey. For those who find themselves overwhelmed by high interest rates and credit card debt, bankruptcy might be an option to consider. It can often absolve a significant portion of debt and put people back on a path to financial security. Depending on the options available, personal bankruptcy can help people in debt keep their home while paying off their consolidated debt.

Although banks' profits have gone down, they have begun targeting individuals who have a history of debt or late payments. This can put some borrowers in a sticky situation. In an environment where loans are getting easier to get, some people may struggle with payments after a bout of unemployment or part-time work. It is always best to avoid unwanted debt but the good news is that there are many options for people who have high debts and cannot seem to pay it off.

Source: The Wall Street Journal, "Credit- Card Lenders Pursue Riskier Borrowers," Annamaria Andriotis and Robin Sidel, June 26th, 2014

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