If you are struggling with debt, credit and trying to get back on solid ground financially in Philadelphia, you may feel like it is impossible for you to buy a house or vehicle. Fortunately, even individuals who have less than stellar credit and financial profiles can still finance cars and houses. However, that privilege often comes with a steep price in the form of subprime loans.
Subprime loans have extremely high interest rates. Lenders market them almost exclusively to people who have poor or limited credit. They exist to provide people like you a fresh start to secure the housing and transportation you need. Here is what you should know about subprime car and house loans.
Targets those who have less financial means
If you live in an area where you need a vehicle to get back and forth to work or you have to buy a house because the mortgage is cheaper than rent, you may seek out loans from lenders who are willing to take a chance on you because of your financial situation. Because you do not have the greatest credit profile and lenders consider you a high-risk consumer, you often have only limited options for financing. Instead of qualifying for loans with low rates, good terms and flexible payments that can make your financial situation more bearable, you may only qualify for high-interest loans and less than desirable payment terms. This can cause you to feel like there are no other options.
Creates a vicious cycle
At some point after accepting subprime terms for your home and vehicle, you may find yourself struggling to pay your new house and car notes every month. You could end up so far behind on payments that your lenders foreclose on your home and repossess your car. Your credit becomes worse, and you may feel like you did not make any progress at all. Now you are right back where you started with no house or car. But you still owe for them. Several months to years later, your credit and finances improve and you decide to purchase a car or home again. The process repeats itself, perpetuating a cycle of never-ending debt.
It is important for you to thoroughly consider your situation before you apply for any mortgages or car loans. You may feel you can make enough money to pay a high car note or mortgage. But if you do not have much left over for your other household obligations, debts and savings, you could end up over your head financially.
If you decide that taking out a subprime car note or mortgage is best for your situation, make sure you read over the paperwork first. Pay attention to the terms. Consider having an attorney review them with you to keep you from making a mistake that could impact your finances for many years to come.