Is it legal for a lending company to ask for a deposit to get a loan if you are a “high risk”?
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Is it legal for a lending company to ask for a deposit to get a loan if you are a “high risk”?
We were looking for a persoal loan, and a lending company said they could give us the loan but we have to pay a deposit first because we are a “high risk”. Is that legal?
Asked on May 13, 2012 under Business Law, Virginia
Answers:
SJZ, Member, New York Bar / FreeAdvice Contributing Attorney
Answered 12 years ago | Contributor
It is completely legal. The law does not require lenders to make loans at all--consider during the depths of the Great Recession, when many banks were simply not providing mortages and were allowed too do that. It is voluntary on the part of lenders to provide loans, and they may evaluate risk, price loans accordingly to reflect risk, and also require collateral or security. What you describe is not dissimilar to a secured credit card, where the cardholder has to provide a deposit to the issuer as a hedge against default; it's also similar to many real estate and vehicle loans, where there is property as collateral.
The lender may therefore ask for this; if you do not want to, or cannot provide it, then seek a different lender.
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