You've probably seen the television commercials for companies or other mortgage lenders, roadside or even signs, which indicate "Bad Credit OK." It is a great success, especially for people whose credit has taken a little, or more than a few dings, or who have a recent bankruptcy of their credit report. But what is meant by "Bad Credit OK?
The delinquency rate on home equity lines of credit (HELOCs) and the rate of foreclosure homes has increased considerably in recent times. This can occur for many reasons, illness, sudden loss of employment, etc. These ads seem to be a lifeline for people who have had credit problems in the past and want to make a fresh start; faire Attention, however, because often "Bad Credit OK" is a sign of predatory lending.
To some extent, it is reasonable to charge a higher interest rate when extending credit to those who are at greater risk not to pay their debts. This higher rate reduces the risk that the lender does not recover the money that was lent. But there is a point beyond which higher than the interest rate becomes predator, not bargains. Add to that late payment fees and other bonuses, which are often attributed to those whose credit is not perfect, and it makes it even more difficult for consumers who are already in financial difficulties to pay their debts. "Bad Credit OK" sounds like an invitation to the promised land of rebuilding your credit, but it can be an invitation to do even more deeply in debt.
Borrowers are partly responsible for their bad lending decisions, but the downside is irresponsible borrowing irresponsible lending. "Bad Credit OK" indicates that we can afford this house, this car, big screen TVs. We know we can not afford it, but a lender is telling us, we can, and it's hard to resist. The problems with irresponsible loans go well beyond higher interest rates and higher taxes, and extend to inflated sales prices and loan documents inaccurate.
Ultimately, "Bad Credit OK" is a little more than a statement that you pay more for less.
The delinquency rate on home equity lines of credit (HELOCs) and the rate of foreclosure homes has increased considerably in recent times. This can occur for many reasons, illness, sudden loss of employment, etc. These ads seem to be a lifeline for people who have had credit problems in the past and want to make a fresh start; faire Attention, however, because often "Bad Credit OK" is a sign of predatory lending.
To some extent, it is reasonable to charge a higher interest rate when extending credit to those who are at greater risk not to pay their debts. This higher rate reduces the risk that the lender does not recover the money that was lent. But there is a point beyond which higher than the interest rate becomes predator, not bargains. Add to that late payment fees and other bonuses, which are often attributed to those whose credit is not perfect, and it makes it even more difficult for consumers who are already in financial difficulties to pay their debts. "Bad Credit OK" sounds like an invitation to the promised land of rebuilding your credit, but it can be an invitation to do even more deeply in debt.
Borrowers are partly responsible for their bad lending decisions, but the downside is irresponsible borrowing irresponsible lending. "Bad Credit OK" indicates that we can afford this house, this car, big screen TVs. We know we can not afford it, but a lender is telling us, we can, and it's hard to resist. The problems with irresponsible loans go well beyond higher interest rates and higher taxes, and extend to inflated sales prices and loan documents inaccurate.
Ultimately, "Bad Credit OK" is a little more than a statement that you pay more for less.
