It’s been exactly one week since the boyfriends mom bought her new car. In order for her to get this car she had to get herself a loan. She went through the same company she got the loan for her house from so since she had good credit with them she was almost instantly approved and is now the proud owner of a brand new van.
I’m not a big fan of the idea of taking out a loan, but when desperate times call for desperate measures than I guess you have no choice in the matter. I believe the loan ratio at this point is 1:3 at this point considering the country runs on credit. The thing I don’t quite like the idea of are bad credit loans. When you have bad credit, the only loan you’re most likely going to get is a secured loan. A secured loan is defined as:
A secured loan is a loan in which the borrower pledges some asset (e.g. a car or home) as collateral for the loan. The loan is thus secured against the collateral ?¢‚Ǩ‚Äù in the event that the borrower misses a few payments, the lender takes possession of the asset used as collateral and may sell it to regain the amount originally lent to the borrower.
This means you can lose your HOME, or even your CAR if you mess up on your payments. Is putting your home at risk really worth the price of the loan?
Another option really isn’t based on your credit score, so I don’t quite understand it…it’s called an unsecured loans. An unsecured loan is defined as:
Unsecured loans are loans that are not guaranteed with any asset, so that the risk of repossession does not exist. Though the lender can still take legal action in order to recover the money, such a legal process would be significantly longer and more expensive than with secured loans. Typical unsecured loans are credit card debt, bank overdrafts, and personal loans.
When they talk about it this way, an unsecured loan is basically every time you overdraw your bank account. All you have to pay back is everything you took out, without interest…at least that’s what they want you to believe. With ALL of the banks I’ve dealt with, there was a $20-$50 overdraft FEE. Say happen to be late on a deposit and go -$1 over with a withdrawal, you’re charged $30. So instead of paying back the $1 you need to get your account to $0.00, you have to pay the bank $31 in order to make things right again. These over draft payments are what contributes to your credit score, at least that’s what I was told.
Your credit score, most times, isn’t even based on an actual credit card most of the time. It’s based on your cycled billing payments. Take your cell phone bill for example. Figure you pay around $70 a month for your cell phone, this would include any fee’s or taxes you have to pay on it (obviously). If you never miss a payment and never are late on one, you’re considered to have “good credit” with the company. This helps your credit score and the rest goes from there. I’m now basing it on Wiki (best site in the world), but according to them, this is the makeup of a credit score.
So basically, no matter what you do in life financially will contribute to your credit score, I guess you have no choice in the matter but to be an upstanding financial citizen if you plan on borrowing money from anyone.
I should say that it’s more important that you care about your credit history and report than your fico score. For example you might have a good credit score but not a solid and established credit history. In this case, despite your good score, you will not be approved for a mortgage loan or a car loan. Therefore you should be establishing a good credit history as well as trying to boost your score.