Bad Credit Loan -- Let's Cut Through the Hype!
Bad credit loans
seem to be a hot topic these days. In fact, if you need a bad credit loan,
you're likely to find an overabundance of information.
See if this sounds familiar. You need a loan. Maybe you want to
buy a car, enroll in college, or take out a home improvement
loan. Or perhaps you're a first time home buyer and you're
looking for a mortgage. The problem is, you've got a bad credit history,
and you're afraid you won't be able to find a lender.
But then you do a little research on bad credit loans and
find that, lo and behold, there ARE loans for people with bad
credit available! In fact, EVERYONE wants to give you a
loan. Loans for cars, mortgage loans, student loans, personal
loans, loans for just about anything you want. Not only loans,
but credit cards too. Why, who would have ever thought is would
be so easy to get a loan when your credit history is so
dismal?
So, that's great news, right? RIGHT?
Let's just stop for a moment. Ask yourself "Why is everyone so
eager to extend credit to me when my credit history is so
bad?"
The question can be answered in two words -- HIGH RATES. Sure,
you can get a bad credit loan easily enough. But you'll "pay
through the nose" when it comes to the interest rate.
So "What's the 'big deal' about paying a little higher rate?"
you ask.
Let's look at a few figures.
Suppose you want to buy a car. After looking long and hard, you
find the "perfect" car for $20,000. So you apply for a car loan
and get a loan with no trouble, but because of your poor credit,
you have to pay 20% interest. On a 60 month loan, your monthly
payments will be $529.88.
Now if your credit were very good, you might have gotten the
same 60 month loan at an interest rate as low as 10%, with
monthly payments of $424.94.
The bottom line is, over the life of the loan you'll have paid
an additional $6,296.40 in interest that you would NOT have paid
if you had you gotten the loan at 10% interest. Your bad credit loan will
have cost you $6,296 more FOR THE SAME CAR!
But if you think that's bad, take a look at a home mortgage
loan.
Suppose you want to buy a $100,000 home and you're just
thrilled to find a lender willing to give you a 30 year loan in
spite of your bad credit. He'll charge you 12% interest, and
your monthly payment will be $1,028.61.
If your credit had not been so bad, you could have gotten the
loan for a rate closer to 9%. If your credit had been very good,
you might have been charged only 6% interest and your monthly
payment would have been $599.55.
The bottom line? That bad credit loan will
have cost you (over the 30 year term) a staggering $154,461.60
MORE than you would have paid had you gotten a loan at the 6%
rate.
No, this is NOT a typo. Your lender will pocket $154,461.60 in
additional interest payments because you were charged a higher
rate for a bad credit
loan. That's over 1