How to mismanage your money.

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 that loan? Especially with debt and arrears on a mortgage already? Well, obviously Tony Meadows would.
I find little sympathy for this couple. They've dug their own hole and now they're falling in. Their house apparently is only worth £200,000 which means that even if they sold the house and lived in a tent, they'd still owe £184,000 .....

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