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Beware of new tricks of the trade to get your money

Tuesday, 27 Aug 2013 | 3:51 PM ET
New tricks of the trade
Saturday, 24 Aug 2013 | 9:05 PM ET
How lenders are digging into their bag of tricks to get you to spend more money than you have.

It is becoming easier to get a loan these days and that's not necessarily a good thing.

"I'm telling you things have gone bizarre again, at the exact time they shouldn't be going bizarre. So, you need to stay very strict with yourself," warns Suze Orman.

According to the Mortgage Credit Availability Index (MCAI), credit has consistently become more readily available over the past few months. The MCAI increased for the fourth-straight month in July to 112, up from 100 in March.

This is still a far cry from the 800 it would have been in 2007 when loans were their easiest to obtain, but it clearly shows a move toward looser credit requirements.

Therefore, as banks become more lenient, consumers must become more discerning about their own financial situations. "Don't get tricked into doing something you can't afford," says Orman. "Be very, very careful."

Here are a few of the things creditors are doing to get you to spend money you don't have:

New tricks of the trade

Real estate

—You can buy a home with no money down again

—Piggyback loans are back:

—80 percent loan

—20 percent HELOC

—Private Mortgage Insurance (PMI) required for the life of the loan. This means you will have to pay this premium in addition to your principle and interest for the full 15- or 30-year term.

Car and vehicle buying

—Car loan financing available for up to 96 months versus the average 60 months


Source: Evan Joseph

While the average auto loan term in 2012 was roughly five years according to Experian, Orman has always frowned upon auto loans exceeding three years. Now lenders are offering loans up to eight years. "You're going to buy a car, and you're able to afford it because you're going to pay interest for the next 96 months?" asks Orman.

"Just because now everybody's moving up in homes and cars doesn't mean that they have the money to do so. So stay solid, stay honest and only do those things that you really can afford," advises Orman.

See what else Suze Orman has to say every Saturday at 9 p.m. EDT on CNBC.

See the most recent episode of "The Suze Orman Show."


—By CNBC's Sakina Spruell. Follow her on Twitter @SakinaCNBC.

Contact The Suze Orman Show

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  • Host of "The Suze Orman Show," Orman is a two-time Emmy Award-winning television host and an expert on personal finance.

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