Bad Credit Loan -- Let's Cut Through the Hype!
Written by: Jim Eastman
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
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
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?"
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
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%
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 ½ times the cost of the house itself!
So why did he charge you the higher rate? Because he knows he
can get it! After all, he's got you "over a barrel." 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.
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.
So what's the solution? You may be thinking "What choice do I
have anyway? My credit is bad, I need a loan to get a house (or
car, college education, or whatever) 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, you should be thinking about
repairing your credit.
Now 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.
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 $150,000.00
or more over the long haul?
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!
It's not that difficult either. You basically have 2 options.
You can hire a "Credit Repair Agency" or you can take the "do it
If you decide to hire an agency, you can easily find one in
your phone book or online. Just look for "credit repair."
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.
But if you think only a professional agency can fix your credit,
think again! In spite of their high fees, they won't do anything
for you that you can't easily do for yourself. If you can write
a few letters, address, stamp, and mail them you can repair your
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, you should seriously consider postponing your
search for a bad
credit loan. First spend a couple of months improving your
credit rating. Then you can abandon the search altogether, and
begin looking for a GOOD credit loan!
(c) eBusiness Power
About the author:
Jim Eastman is the support contact for http://www.ErasingBadCredi
t.com. People wanting to repair their credit rather than pay
thousands too much for a bad credit loan, can
visit the site and sign up for a free mini-coures on credit
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