A dragnet clause written into a loan contract empowers a lender to a specific link debt of a borrower with other debts.
Such terms can give lenders too much of an unfair advantages regarding collections. As such, dragnets are often frowned upon by consumers and even government authorities.
The dynamics of how it works is something like this.
If a borrower has a mortgage and a personal loan legally under his name, a default on the latter can be deemed as a default on the former by a lender should there be a dragnet clause written into the contract agreement.
This effectively means that a default on a personal loan can result in foreclosure proceedings even if the borrower had always made timely repayments towards the home loan.
In extreme cases, even loans taken at a later date than the loan with the clause will be dragged into the liability as well.
As the thought of such practices by lender would intuitively trigger a feeling of unjust on the part of consumers, a lot of negative press has been given to dragnet practices.
Some even consider it as a form of predatory lending.
However, it must be noted that even though dragnet clauses exist, it is a challenge in itself to enforce as judges tend to favor the victimized borrowers should a case be brought before the court.