Do People Really Fall For This?

It is a rhetorical question because savvy reader, we already know the answer.  I was listening to the radio this morning while driving Frugal Boy to the babysitters when an ad came on.  It was for a local credit union advertising their “Lifestyle Loans”.  Wow, how thoughtful of them to lend some money right before Christmas time.  I turned up the volume because I knew this was going to be rich.  After hearing the terms and conditions I made a mental reminder to look up the offer online when I got home.

Here is what their website had to say.

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Lifestyle loans can be up to $20,000 at a *low*, *low* rate of only 9.5%.  The term is maxed out at 36 months.  If those terms aren’t *good* enough for you, they are also nice enough to throw in a %1 cash back on the amount you take out (e.g. $200 on a $20,000 loan).

Using a simple loan calculator, I can see that a $20,000 loan at 9.5% for 36 months will have a monthly payment of $640.66 and cost $3,063.72 in interest over three years.

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If you factor in the 1% immediate cash bonus and applied that against the interest the “real” loan rate would be about 8.9%, an absolutely abysmal rate.

Out of their proposed list of items and services I only see a handful that might qualify for taking on a shark type loan.  Even then you could probably work out a payment plan with a funeral home, HVAC company, or hospital that would be cheaper than a 9.5% loan.

Anyway, I just had to stand up on my soapbox.  This is a local credit union that sells a crappy product to people in our community.  Obviously people gobble it up because they just NEED golf carts, cosmetic surgery, or honeymoons.  Christmas isn’t about those things, and people don’t need to take out loans for Christmas.


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