I found a story online today about a couple in England who are about to lose their house for the sake of a £6,000 loan.
How?
Well they took out a loan for £5,750, at an APR of 34.9% over 15 years. Ok, a lot of people might do that, but not when they're already £2500 in arrears on their mortgage.
Tony and Michelle Meadows took out the loan in 1989 to make improvements to their semi-detached house. They started having trouble paying the load almost immediately, and eventually missed a year in payments. With legal charges, interest, penalties and late payment fees, that loan is now at £384,000. They've already paid £25,000 over 15 years...
Let's analyse this a little. First off - 34.9% ??? The loan company saw them coming. And then over 15 years ? A little calculation shows the monthly payment would have been £168.19, which means that in the best case scenario, they would have paid £30,275 for their £5750 loan - ie. the loan cost £24,525. Thats bonkers! Who would sign up for …