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Predatory lending is a term we hear often in the U.S.. In simple terms, it is companies offering products or services to people at incredibly high interest rates.  There are many forms of this type of lending, and here are two of the most popular.

Rent-to-Own:
There are some consumers who swear by rent-to-own companies.  For some of these low income consumers, this is perhaps the only way they can get new furniture, electronics, and appliances.  The down side to this type of borrowing is that many of these companies charge very high interest rates.  Some rates can go as high as 235% and there are other fees and charges tacked on to that.

Some states have begun to take action against such practices.  For example, Wisconsin, Vermont and Minnesota have acted to protect their residents from rent-to-own outfits with rate disclosure requirements.  The state of New Jersey has placed caps on the interest rates that can be assessed at a reasonable 30% APR.

Other states, however, have gone backwards and are actually enacting laws that protect this industry.  An industry-backed bill in the U.S. Senate - S 603, the Consumer Rental Purchase Act (Landrieu, La.) seeks to preempt, or override, these strong state consumer protections.

Payday Advance Loans:
This is another popular loaning system that can get consumers into financial trouble if they are not careful.  For the most part, those who use payday loans are lower income individuals who often need quick cash for any number of reasons.

Many of these people believe that they are getting a short-term loan that they can easily pay back, but many will find themselves extending the loan contract and paying a high cost in the process.

Some states such as New Mexico have very lax laws concerning the loan practices of these types of companies.  In some cases the average borrower will discover he or she is charged such high interest rates that they have to extend the loan five or six times.  A two-week loan can become a three-month loan, with interest rates going as high as 500%.  It does not take long before the borrower is paying more on the interest charges than the original amount of the payday loan.

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