What you don't know CAN hurt you if you have bad credit and need a loan. Taking this simple advice could save you hundreds or even thousands of dollars.
People want bad credit loans a lot. And if you look up "bad credit loan," you'll find a lot of information about how to get the lowest interest rate. You'll also find many people willing to give you a loan even if you have bad credit, but it would be a mistake to take one.
Most of what you'll find, though, will approach the problem in the wrong way. Most people don't know or don't want to know how to get the BEST interest rate on a bad credit loan.
But before we move on, let's take a short break and look at how much the borrower is affected by the higher rate for a bad credit loan.
Let's say you want to buy a house but your credit isn't good. No matter how hard you look for a lender, the interest rate on a bad credit loan will always be higher than if you had good credit.
If you have good credit, you might be able to get a mortgage loan with an interest rate of 6%. But a loan for people with bad credit will cost you more like 12 percent. If you get a $100,000 mortgage and pay it off over 30 years, you'd pay a huge $154,461.60 MORE in interest because you have bad credit. That's more than 12 the amount of the loan!
Now, to get back to our original question, how can you get a loan with bad credit with a lower interest rate? Most likely, the answer is not what you thought it would be.
"Think outside the box" is the answer. The best way to get an interest rate on a bad credit loan is to not get one. Instead, fix your bad credit for a couple of months and then look for a "good credit loan."
You might be a little surprised by this answer. Most likely, more than one thing will come to mind that is wrong with this plan.
"I need a loan RIGHT NOW!" or "It's not worth my time to wait until my credit is better."
Oh yeah? So, is it worth saving at least $150,000? Even though you might not need a $100,000 loan. But even if you only want to borrow around $10,000, the better rates you'll get with good credit will still save you a few thousand dollars.
- "It will take too long to fix my credit, or it's just not possible."
Many times, you can make a big difference in your credit score in just a few months, and sometimes in as little as 30 days.
- "I don't know how to fix my credit and can't afford to hire a credit repair agency."
You can buy a good book on credit repair that will walk you through the whole process for a small fraction of what it would cost to hire a professional service.
- "It's too hard to fix your own credit," or "I don't think I can fix my own credit."
Don't be scared of the idea of fixing your credit on your own. You can fix your own credit if you can write a few letters, address them, put stamps on them, and mail them.
Your choice comes down to this: you can do either of these two things.
- You can spend some time (maybe A LOT of time) looking for a bad credit loan with the lowest possible rate, but you could still end up paying thousands (or even tens of thousands) more in interest.
You can spend some time fixing your credit and use those thousands of dollars to help your family instead of giving them to your lender.
Do you really think that your lender needs the money you've worked hard for more than you and your family do? Anyone can take steps to improve their own credit. In other words, anyone!
Get a good book on how to fix your credit and start RIGHT NOW.
eBusiness Power, 2005
