Spread the love

Planning to purchase a new vehicle or valuable item for your personal collection? There are plenty of loans and financing options available to you in the market. Choosing the right one is a matter of which loan type suits best for your financial situation. Banks, dealers, credit unions and individual lenders like a diamond jewelry loan midwest are ready to lend you loan for that purchase. For people with strong credit history, the task of obtaining such a loan is relatively an effortless process, even if the economy is not doing great. But for people with shaky credit score, things can be much more difficult. Getting approved for a loan for those who are a high credit risk is like winning a lottery in a local community. If approved, the interest rate, charges and fees can be dramatically high over the course of the loan. 

Paying too much money in interest and fees can end up in the borrower being upside-down on a loan. This means the total worth of the purchase is lesser than the loan amount. Such cases frequently happen when people with low credit score buy new vehicles. Their vehicles when sold in the market after purchase will go for lot less than what they owe to lenders. For example, a borrower who has purchased a car for $15,000 may end up with only $10,000 when he decides to sell the car immediately. He still needs to come up with $5000 in cash to pay off the debt. This means the borrower is upside-down on the loan, which will not only hurt his financial health but bring down the credit score even further. By having high interest rate and fees just because the credit history is bad will lead to more money toward interest and fee payment and less money toward the loan’s principal. 

So, what happens when the borrower goes default on the loan? What will be the course of action taken by the lender if the borrower fails to make monthly payment on that new purchase? Obviously, the purchase will be repossessed by the lender. Any collateral will be repossessed as well. The amount collected after the purchase is sold in the market will go toward what the borrower still owes on the loan. Additionally, there may be legal fees involved, which the borrower needs to pay off. The borrower will also find it an impossible task to get approved to any other loan – be it from a big bank or risk-taking lender. However, this should not discourage the borrower from shopping around for the best deals in financing. There might be lenders who are willing to lend money based on the borrower’s current salary. They have a set of payment plan that is suitable for the borrower’s situation. Car purchasing can be done directly through the car dealership. They may probably offer lowest interest rate and loan fees the borrower would qualify for. Nevertheless, no lender will guarantee a rate until all the application forms are processed.