THE TRUE COST OF BAD CREDIT LOANS
Having a bad credit history will hurt you severely financially. Almost everything you need to have to survive will cost you more.
Lets start with where you live. Regardless of income (in most cases) your options of renting a house or apartment will be limited. Landlords want people who have a history of paying on time. So where does that leave you? Probably paying too much for a substandard apartment in an area or town you would rather not live in.
Now, what about your utilities: phone, electricity and/or gas. Because of your bad credit you'll have to plunk down some healthy deposits. Money that could be earning some interest for you in the bank. People with good credit normally don't have to pay these deposits.
Want a cell phone too? You could be looking at deposits of up to $1,000.00 here for normal cellular service. Or you could buy the phone and service that uses those prepaid cell cards. Only problem here is that you will be paying up to six times more for your air time doing it that way. See how your bad credit is starting to cost you big time?
But wait, it gets better. Now it's time to buy a car! OK, so you have bad credit, but not that bad. You managed to get approved by a secondary lender at 21% interest, but at least you got approved, for $20,000.00 no less. Your payments would be $541.00/month. Over the normal 60 month loan term your total payments would add up to $32,460.00.
Too bad your credit wasn't good enough to get the special dealer financing of 3.9% interest. That would have made your payment $367/month for a total of $22,020.00 over the 60 months. Your bad credit here is costing you over $2,000.00 a year. That was just an average scenario.
If you have really bad credit you still may be able to buy a car at a "Buy Here, Pay Here" car lot where interest rates of up to 30% are not uncommon. But the interest rate is not the only thing that will cost you here. Typically the cars available here will be older, higher mileage models and will be grossly overpriced. The dealers profit will be $2,000.00 to $4,000.00 (at a minimum) on each car he sells.
Now, consider the rapid depreciation of this type of vehicle, the extremely high interest you are paying, and the fact that you had to pay much more than the vehicle was actually worth. In a relatively short period of time you will still owe thousands of dollars on a car that is almost worthless. And lets not forget about the repair bills on these types of cars.
Now, you want to buy a house with bad credit? You can run those numbers yourself, just figure you'll be paying at least an additional 2%-4% interest for a mortgage. These are just some of the ways your bad credit is financially killing you. Isn't it time to do something about it?
Understanding Your Personal Credit Report
The True Cost of Bad Credit Loans