Credit Topic:Bad Credit

Do you want to settle for a
bad credit loan?

It is certainly more difficult than it was in previous years, but you may still be able to get a bad credit loan if you have steady employment and make enough money. But even if you can get a bad credit loan, do you really want to?

But, if you are able to get approved for a loan when you have a bad credit score, the interest rate and terms you will be offered will probably quickly offset whatever satisfaction you felt. When you have a low credit score, lenders interpret this as meaning that you are a high credit risk and are more likely to default on a loan than someone with a good credit score. To offset this risk, lenders will likely charge you much higher interest fees. Then, if you or anyone else they are lending money to ends up declaring bankruptcy or otherwise defaulting on the loan, they have all that additional money they charged people with bad credit to cover the loss.

Basically what is happening is everyone with a bad credit loan is paying extra to make up for the fact that the people with bad credit loans are more likely not to pay off the entire loan. And these extra fees can be very steep. Using the calculator below, you can see that on a $20,000 car loan paid over 60 months, someone with bad credit can expect to pay $4,980 more than someone with a high credit score. And with a bad credit mortgage, the numbers are far more staggering. On a 30 year mortgage of $250,000, someone with bad credit could end up paying over $380,000 more in interest payments than someone with good credit.

For details on how this information is estimated, please click here.

Of course, when you look at the numbers this way, it seems that people with bad credit loans are getting charged much more than is required just to cover credit risk. Perhaps this is why so many companies are eager to bring in more bad credit clients.


“You guys did a great job! My beacon score went up 90+ points in less than a year. I went from horrible credit, to marginal to good credit. We have even purchased a house and went with a conventional mortgage.”

K.D., Lexington client*
(Your results will vary)
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