|
We've received a significant number of calls from clients asking if they should take out a credit repair loan to help them rebuild their credit and even build up their savings.
We understand the desire. You hope to improve your credit score so that you can qualify for a car loan or mortgage at a lower interest rate. The sad truth is that many companies understand your desperation and have designed programs they say can help however the cost is usually quite expensive.
We looked into a couple of popular programs including one that offers to loan you money to help you rebuild your savings. Here's what we found:
- the inherent interest rate in one such loan that we looked at was 26%;
- this included a $200 up-front service fee; and
- after paying $1,511 in payments, the client would have savings of only $1,000.
If setting aside some savings is your objective, you would be better to put the equivalent monthly payment into a separate savings account on your own. Arrange to have this done through automatic savings deductions to ensure that you meet your savings goals.
While we cannot definitively say how a $1,200 loan would impact this client's credit score, it is likely that a credit card of that amount would have a similar impact and, if paid off monthly, would cost significantly less.
Our advice is to look at the numbers carefully before signing up for any credit repair program, know what the full cost will be and make sure any such program meets your financial goals. Lastly, do your research to see if there are better ways of meeting those objectives.
|
