Terms of our best loans . . . who knows?
Here’s an example. Recently, at a boat show, I overheard a man ask one of the boat dealers about financing terms. The question posed was very simple: “What terms can I expect if I qualify for one of your loans for people with bad credit?” The man simply wanted an estimate of the interest rate he could expect. The response was astounding. The boat dealer said, “There is no way to know until we run a credit check on you.”
The man was persistent, “Assume I have just below average credit. What range of interest rates could I expect you to offer.”
The boat dealer again deflected the question, “There’s really no way to know. Like I said, we have to run your credit first.”
That simply wasn’t true. Any boat or car dealership should be able to provide a range of interest rates and other terms for the most recent best loans they have approved. In other words, dealers have actual data from recent loan transactions that would allow them to provide a range of interest rates on personal loans for people with bad credit through the best loans offered to people with excellent credit. So what was really going on?
The answer is simply that the boat dealer was employing a sales tactic. The old “never let ‘em know what it’ll cost until they gotta have it” trick. Here’s where that can hurt anyone looking to qualify for the best loans over and over again. By allowing a dealership, store, or credit card company to “run your credit,” you could actually be hurting your credit! That’s something they won’t tell you though.
Best Personal Loans for People with Bad Credit
Before applying for a personal loan for people with bad credit, you can do some homework so that you know what to expect in terms of financing before you start the paperwork. That way you can insist upon the best loans for you. Keep in mind that these factor are dynamic and will be different for each individual situation. Your goal should be to get an range of what you qualify for, so that you can make educated decisions. Consider these terms:
- Interest rates. Obviously the best loans are the cheapest loans. Interest rates will vary based upon your credit score (or “FICO”), the length of the loan, and the amount you borrow. Always check and be aware of commercial loan rates.
- Length. The longer the loan, the more you will pay in interest over the life of the loan, even if you are offered a reduced interest rate for extending the repayment term.
- Payment terms. Some loans include a prepayment penalty. The best loans will not have such a penalty.
Here’s a tip for finding the best loan terms: Negotiate a longer payment term with a slightly lower interest rate and no prepayment penalties. Then make early payments! You will save a ton in interest over the life of the loan and your credit score will increase, sometimes dramatically.
Loan Quality is Subjective
Sometimes it feels like the best loans on earth are the ones that just get you what you want, when you want it. At other times, they are just loans that help us survive until next payday. However, it’s important that you keep a few things in mind. In general though, the best loans are cheap loans.
- Don’t get it over your head. Sales people are not your friends. They want one thing . . . to make the sale, and they don’t care about the personal cost to you.
- Ignore marketing. This is hard because marketers are better than psychologists when it comes to conditioning human behavior. Marketers can make us passionately want things today that we didn’t even know existed yesterday. Lenders do the same thing with money. Before you borrow, make sure you’ve done your homework and that you’re not buying on impulse.
- Meet your obligations. If you want to qualify for the best loan terms on a continuing basis, you have to meet the terms of the loans you have in place now. Lenders will look to your past as a prediction of your future. It might not be totally fair, but it’s reality.
Types of Loans
Best Car Loans.
The best car loans can be extended for much longer today than the case has been traditionally. That’s good because cars are much more expensive today than ever before. A friend of mine recently received a rate of 4.25% over five years on a loan for a used car. That struck me as probably one of the best car loans available. While not even close to as good on terms or rates, bad credit car loans do exist.
Student Loans.
These are often very bad, because they are very difficult to get rid of, even in bankruptcy. There are many, many ways to finance an education. Consider some of the alternatives such as scholarships, grants, and work-study programs before applying for a student loan. On the good side, some student loan interest payments are federally subsidized until six months after a student graduates.
Collateralized loans.
These range from home mortgages and loans to purchase vehicles all the way to the loan-shark type of businesses that will take car titles and pawn shops. These can be good or bad, depending on your need. Unfortunately, the greater your need, the less likely you are to qualify to good credit terms. If you’re thinking about putting your car title up for collateral to any lender other than a bank, you might be better off just selling your car and buying a bike. Watch out for zero money down ($0 money down!) loans, especially on homes. If the recent credit crunch taught us anything, it’s that the value of real estate can and often does goes down. If you buy a house without a down payment and the value of that house falls, you could end up owing more than the house is worth. Not a good situation to be in!
Unsecured loans.
Credit cards are an example of unsecured loans. Unsecured loans can be the best personal loans for people with bad credit, if you’re responsible. There is nothing wrong with credit cards, as long as one knows how to use them. No, no, no . . . I don’t mean that you know how to swipe them in the in the store! Credit cards can be a great source of free money. You heard that right. Free money! Those are the best personal loans for people with bad credit!
Here’s how you do it: Apply for a card that has no annual fee. Once you get a credit card it’s okay to use it as long as you follow one simple rule: You must pay off the balance of your credit cards in full every singe month! Yeah, yeah . . . I know. That doesn’t like much fun, but it truly is the best loan you’ll ever get.
And keep this in mind: The best payday loan is no loan at all! The places that typically lend based on submission of several paycheck stubs or car titles tend to charge exorbitant interest rates. Avoid those types of loans, if at all possible. If absolutely necessary, make sure you shop the best payday loans available, and do wait until the last minute to take out these types of loans, as even a day or two of delay can save you a ton of interest expense, even from lenders of the best payday loans.
Before you seek out a loan, make sure you’ve asked yourself whether you really can afford whatever it is you want to finance. Sometimes we can’t afford NOT to get a loan. Sometimes it’s a matter of survival. That’s understandable. What’s important in that situation is that you make every effort to qualify for the best loan possible and that you meet your obligations. That way you can continually qualify for favorable financing terms. The best advice I can offer is to view credit building as a process and try to enjoy it. It’s a long road, but if you stay committed, it’s only a matter of time before you start qualify for the best loans on earth. Continue reading at Loans For The Unemployed . . . .