Are You Aware That You May Be Throwing Money Down The Toilet On Your Home Loan?
Did you know that the most expensive type of finance when purchasing a new home is known as a 'bad credit Loan' or 'blacklisted loan'.
If you are looking for a loan to buy a home but find that due to your low credit record the only finance you get is a bad credit loan then before going ahead with this very expensive option perhaps you should consider the following. |
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Dear Blacklisted
If at first your home loan is declined, your bond originator can always attempt to apply on your behalf for a bad credit loan or blacklisted finance. Firstly what you need to be asking yourself is...
If at first your home loan is declined, your bond originator can always attempt to apply on your behalf for a bad credit loan or blacklisted finance. Firstly what you need to be asking yourself is...
What are bad credit loans and how does it work?
Why are some companies falling over themselves to provide you with blacklisted finance to get you the bond you so desperately want?
Why are some companies falling over themselves to provide you with blacklisted finance to get you the bond you so desperately want?
The answer is clear...
A home loan for an individual with bad credit means that your credit profile contains some 'blacklistings' or defaults. Your inability in the past to repay debts reflects at the credit bureau's which in turn is used by the bank or other financial service providers to score your risk profile.
Once you apply for a home loan then your mortgage originator will send your bond application off to the bank. One of the first things the bank will do is perform a credit check which is based on a scoring system that automatically pre-approves or declines you. The scoring system will make a judgement based on your 'risk profile' and then spit out an answer.
The bank then notifies your mortgage originator that the loan can be granted but 'based on the clients risk profile' it is at a higher interest rate. Your originator is happy because they got the application 'approved in principle' and will contact you with the results of the application. It may not specifically be named as a 'bad credit loan' or blacklisted finance' but the point is that your loan is granted based on your risk profile, and if your profile is 'risky' according to the bank's computer system then you will land up paying far more monthly on this finance deal.
A home loan for an individual with bad credit means that your credit profile contains some 'blacklistings' or defaults. Your inability in the past to repay debts reflects at the credit bureau's which in turn is used by the bank or other financial service providers to score your risk profile.
Once you apply for a home loan then your mortgage originator will send your bond application off to the bank. One of the first things the bank will do is perform a credit check which is based on a scoring system that automatically pre-approves or declines you. The scoring system will make a judgement based on your 'risk profile' and then spit out an answer.
The bank then notifies your mortgage originator that the loan can be granted but 'based on the clients risk profile' it is at a higher interest rate. Your originator is happy because they got the application 'approved in principle' and will contact you with the results of the application. It may not specifically be named as a 'bad credit loan' or blacklisted finance' but the point is that your loan is granted based on your risk profile, and if your profile is 'risky' according to the bank's computer system then you will land up paying far more monthly on this finance deal.
So how harmful can a 'bad credit loan' or 'blacklisted finance'
really be to your financial well-being?
I bet simply having your homeloan approved makes you just relieved that the almighty bank you applied with was so kind just to give you the home loan right?
However the 'hidden costs' that you may be ignoring are high, and the long term effect on your finances can be crippling.
Simply put blacklisted finance or a bad credit loan is normal bond finance wrapped up into a "special" higher interest loan! This means that you will pay a higher premium of interest on the bonded loan due to your lower credit scoring.
As mortgage originators make their money on commissions paid based on the bond value that they register it makes common sense to offer that more pricey home loan to you as their ultimate objective is to ensure you get what you want, and they get what they want (commission paid), cha-ching!
Instead of paying at worst prime you now have an added one two or more percentage points on top of this. All in all you will most likely pay tens if not hundreds of thousands more than you should due to your bad credit loan!
As a simple example assuming that the prime lending rate is 15.5% and due to your low credit score you get a rate of 1.5% higher than prime at 17%.
However the 'hidden costs' that you may be ignoring are high, and the long term effect on your finances can be crippling.
Simply put blacklisted finance or a bad credit loan is normal bond finance wrapped up into a "special" higher interest loan! This means that you will pay a higher premium of interest on the bonded loan due to your lower credit scoring.
As mortgage originators make their money on commissions paid based on the bond value that they register it makes common sense to offer that more pricey home loan to you as their ultimate objective is to ensure you get what you want, and they get what they want (commission paid), cha-ching!
Instead of paying at worst prime you now have an added one two or more percentage points on top of this. All in all you will most likely pay tens if not hundreds of thousands more than you should due to your bad credit loan!
As a simple example assuming that the prime lending rate is 15.5% and due to your low credit score you get a rate of 1.5% higher than prime at 17%.
Assesment of a bad credit loanMONTHLY CASH OUT YOUR POCKET
Monthly loan repayment @ 15.5% = R11, 507 Monthly loan repayment @ 17% = R12, 467 Monthly difference lost! R960 TOTAL MONEY YOU WILL LOSE Interest repayment over 20 years @ 15.5% = R1, 911 916 Interest repayment over 20 years @ 17% = R2, 142 273 You would have paid R230 357 more |
So the saying is true that...
"The rich get richer and the poor get poorer!"
Clearly loans for blacklisted is definately a more expensive type of home loan finance which almost certainly takes more hard earned money away from you.
As it stands, financing your home loan is expensive without having the additional bad credit loan burden of extra interest piled onto the loan. And even though you did qualify for that secured bad credit loan is it really worth throwing your hard earned cash away on the extra higher interest?
As it stands, financing your home loan is expensive without having the additional bad credit loan burden of extra interest piled onto the loan. And even though you did qualify for that secured bad credit loan is it really worth throwing your hard earned cash away on the extra higher interest?
So...what are the alternatives when you are blacklisted or have a low credit score when you want to buy property?
When I look around I'm amazed at how many people have their thinking conditioned into believing the accepted "status-quo" of life and doing things without questioning anything, not even for a second! I call it sheep mentality because it perfectly illustrates how we act without thinking about our actions properly.
It's not surprising that I get responses like "That's how it's done..." and "You can't do that, it's impossible". Only after sitting and illustrating a few simple concepts do I start to see their opinion change with a gaze of enlightened interest.
I can happily say that I decided to question the 'norm' many years back and truly found an alternative way of buying peoples homes which opened up a vast door of opportunity for me. When I first discovered this simple yet powerful technique I almost had a heart attack as it immediately offered me a solution to my problems. Then I realised, there are 'many ways to skin a cat' but first you must believe that it is possible. Then and only then will the door to new opportunities reveal themselves to you. I wrote Buy Your Home Without the Bank in Less than 30 Days to reveal the opportunities that you never thought possible or passed off as untrue for buying your home. Remember the "status-quo" thinking! Well, I'm confident that the book will open your eyes to the opportunities that await you. And the best part is that almost anyone can do this! This tried and tested method has been proven year after year in several countries to be successful and applies to private home buyers as well as property investors.
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