The Real Dealio On Bad Credit Loans
Feeling the burn of overwhelming credit debt? Well you are not alone
. More and more people like yourself is falling victim of credit card debt - that seemingly sneaks up to people who in the past have presented themselves in good standing with the credit bureau suddenly falling behind and tumbled into the bad credit books. People are becoming more desperate trying to dig themselves out this deep hole. Some companies see this as their opportunity to offer folks in trouble with bad credit loans to settle folks credit debt, and these 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.
Okay, here might be a realistic situation that perhaps you may be facing now: you are falling behind in your credit card payments, or getting on the verge of maxing out your credit cards and cannot keep up with it. 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 that will give you a decent interest rate.
With a little research on bad credit loans, there are loans for people with bad credit available! In fact, everybody wants to give you a loan. Loans for cars, mortgage loans, student loans, personal loans, and loans for just about anything; including the kitchen sink. 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? It seems that a ray of sunshine may be there; BUT wait... 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? There is something defiantly stinky about this scenario.
The question can be answered in two words - High Interest 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. Companies make it a huge cash killing for people who are in need of loans, and believe us when we tell you; that this industry is not suffering anytime soon folks. Because people are just about willing to get a quick fix fast (or get cash fast) they are more likely to sign on the dotted line without much thought of the repercussions.
So What's the big deal about paying a little higher rate? you ask. Let's look at a few figures. Again, this is more likely with a realistic situation that we like to use, so you perhaps can gain a clearer understanding of what this quick fix may bind you into.
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 a whopping 20% interest. Because the really friendly sales person does a fantastic job in getting your dream car, he (she) puts together a 60 month loan. Your monthly payments will be $529.88. Bear in mind that your credit is on the bad side; because should you have had good credit, 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! And this is only for a 60 month commitment. This stings, but not as hard as the next example that we are going to describe: buying a home.
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. Again, bear in mind that your credit is bad, and if you had good credit, 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.
Here's the dealio: 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 times the cost of the house itself! Plus here's the real stinker: you will have to be committed for a very long time, unlike the car loan.
So why companies like these have the gall to charge you the higher rate? Because he knows he can get it! After all, he's got you over a hurdle. He knows (and you know) that you need a loan, but because of your bad credit no one's going to give you one at a low interest rate. This folks is really taking advantage of the weak and perhaps desperate.
Do you see now why people are so eager to lend you money in spite of your bad credit? In fact, credit reporting companies make a fortune selling lenders the names of people who have bad credit. Those lenders know they can charge them high rates, and that if they need credit, they have no choice but to pay them.
This is a tough situation that leaves people asking and thinking: So what's the solution? What choice do I have anyway? My credit is bad, I need a loan to get a house (or car, college education, etc.) and there's just nothing I can do about it except find a lender willing to give me a loan at whatever interest rate I can get! But consider for a moment whether you might be looking at the situation from a completely wrong angle. Rather than resign yourself to the situation, repairing your bad credit is actually the best solution.
Let's get back into the house scenario for a moment. If you just found the house of your dreams, you may have no choice but to act now before someone else buys it. But if you can wait a couple of months, it's highly likely you can make some major improvement in your credit score and THEN look for a loan. Heck, we will be bold and say that with lots of elbow grease and persistence, your bad credit will turn into good credit, and the likelihood of you finding another dream home will be better. Think of this way guys, there are a lot of homes out there, and with time and effort and importantly you have much better options for A: getting the better interest rate because of better credit and more options for different homes that perhaps will be better suited for you and your family. It's actually a win-win situation: if you have the guts to stick it out.
Maybe this isn't what you wanted to hear. After all, you're looking for a loan, NOT credit repair advice. But wouldn't it be worth it to postpone getting that house or that car if it would save you thousands, tens of thousands, or maybe even as high as $150,000.00 (or more) over the long haul? One thing that we can guarantee: cars and homes will always be around. With cars, there will be always better cars, and homes will always be around.
If you're thinking your bad credit history is something you're just stuck with, or that it will take years to improve, you're mistaken. It's often possible to make major improvements in your credit rating in just a few months, and in some cases in as little as 30 days! On the contrary, it's not that difficult either to repair your bad credit. You basically have 2 options. You can hire a Credit Repair Agency or you can take the do-it-yourself approach.
If you have the extra cash and really no time to spend, because it really can take a lot of time to do; hiring a credit repair company may be a sound option for you to do. However, it won't be cheap. Agencies usually charge from $2,500 to $5,000 or more to repair your credit. But that's still a bargain compared to how much you'll be saving in the long run. See this article we posted that talks about this. Just be aware that in spite of finding a credit repair company, you really cannot afford to sit back on your laurels and throw your complete trust.
If you choose the do-it-yourself route (recommended) you can learn how by doing some online research. Unfortunately, along with all the good information you'll find some misinformation as well. A better option is to find an authoritative book on credit repair and follow the advice therein.
In conclusion, most folks are in over their heads with credit card debt and they are looking for a way out. Getting a bad credit loan, although seems to be the solution; you should seriously consider postponing your search for a bad credit loan. Folks should seriously spend a couple of months improving their bad credit rating. Then they can abandon the search altogether, and begin looking for a Good credit loan! In the long run, not only will you save hundreds, if not thousands of dollars, you may finally get your dream home or car with a good interest rate with a more peaceful sound of mind.
by: Teeny solomon
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