What is the cost of bad credit?
If you have bad credit, it may be difficult to get approved for a loan. However, if you have steady employment and make enough money it is possible to get that loan with bad credit, but do you really want one? What is the cost of bad credit?
If you have bad credit and get approved for a loan, more than likely you will have a very high interest rate attached to the loan. When you have low credit lenders consider you a high credit risk and someone who is more likely to default on their loan than someone who has a good credit score. Giving you a loan would be a gamble on their part. To offset this risk, the lender will most likely charge you a higher fee.
Here are some numbers that show the difference between a bad credit loan and a good credit loan. On a 30 year mortgage of $150,000 if you have a bad credit mortgage loan it could end up costing you nearly $52,000!
3.9% rate – $708 monthly payment – $254,701 total mortgage cost.
4.9% rate – $796 monthly payment – $286,592 total mortgage cost.
5.5% rate – $852 monthly payment – $306,606 total mortgage cost.
When you look at numbers like this, it’s obvious that bad credit loans end up costing you a fortune. Is it really worth paying all that extra money? It would be better to get your credit repaired and raise it as high as possible before you lock into a loan. It will end up saving you a fortune down the road.