It’s probably not a surprise to you that banks are in business to make money – a lot of money.
There are many ways for banks to make money, but here’s the basic scenario that they implement over and over every day and how unsuspecting customers help the banks to “fill their pockets.”
How Banks Make Money
Banks take in money in the form of deposits. They pay the person/business making the deposit a very small amount of interest and depending on the type of account, sometimes no interest at all!
Then, they take a high percentage of those deposits and lend it out to people for homes, cars, equity lines of credit, credit cards, personal loans, and other creative lending products. All of these loan products charge interest rates and fees to the borrowers. This is how they churn massive profits – take in money, pay a low rate, lend out the money, collect a much higher rate.
Most people understand that this is how banks work, but here’s the secret that the bank likes to keep to themselves…
If you don’t have perfect credit, they charge you more. Sometimes it’s a little more, sometimes it’s a lot more.
Have you ever seen a sign at a bank that says “Higher Interest Rate Loans Available to Customers with Average Credit”? Of course not! They don’t want to advertise that they charge some customers more than others, but that’s exactly what they do for people with poor or average credit scores.
It may not seem like a big deal because when a borrower applies for a loan, they need the money and they are often just happen to get approved. They accept whatever terms and conditions the bank might offer. But if you calculate the difference the borrower with average credit pays in comparison to the borrower with perfect credit, it is often thousands or even tens of thousands of dollars over the course of that loan. Even if you love your banker, you probably don’t want to give their bank any more money than you have to.
How Can You Save Money?
The answer is usually simple – if you don’t have perfect credit, get it fixed before you need to borrow money. Don’t wait until you need money and end up paying more for it, do it now when you don’t actually need to borrow money! This way, when the next “thing” comes along that you need to finance (house, car, furniture, tuition, home improvements) you’ll be able to save money on the financing.
If so, let’s talk. We’ll explain the credit repair process and tell you exactly how we can legally and ethically improve your credit scores.