Woman shocked to pay $17,000 in interest on used van due to low credit score
A Listowel, Ont. Woman said she was shocked she will have to pay more than $17,000 in borrowing costs for a used van because of her low credit score.
"I don't want to pay double for a van. I can't afford to do that," said Theresa Loth.
Loth said she bought a 2014 Dodge Grand Caravan three years ago and has been paying about $500 a month in loan payments.
She recently went back to the dealership to see how much money she owed and was shocked to see that she has barely paid for half of it due to high interest charges.
When she bought the van she knew she would have to pay higher interest costs because she said she has been late on payments before and has a low credit score.
A credit score is a number between 300 and 850 that tells lenders if you're a good credit risk and the higher the number, the better.
“We knew going in that it was going to cost us more. I knew that I was going to have to pay 20 per cent interest and I was OK with that," said Loth.
However, now she is shocked seeing exactly how much the van is actually going to cost her.
The price of the van was $17,694, but with other fees and taxes the total came to $22,937. Loth took a 6-year loan with an annual interest rate of 21.65 per cent.
The cost of borrowing is $17,314 for a total cost owed of $39,457. Loth said the amount of interest she has to pay is about the same cost of the van.
“For them to tell me after paying $20,000 I still owe another $20,000 after three years is kind of insane," said Loth.
Laurie Campbell, director of client financial wellness with Bromwich & Smith licensed insolvency trustees, said that once you have a low credit score it can take years to improve it.
"The poorer your credit rating the more you are going to pay, the higher your interest rates are going to be for whatever products and loans you get," said Campbell.
Even being late or missing one payment can negatively impact your credit score.
“Whether it's a cell phone bill, a credit card payment or a loan installment, whatever the case may be, you have to make your payments on time, every time" said Campbell.
To improve your credit score, use credit wisely and always pay your bills on time. Always at least make the minimum monthly payment and limit your number of credit applications.
You should check your credit score annually and look for errors.
Loth feels it's unfair that people who have had credit issues in the past should have to pay higher interest rates on loans.
"I feel like it's a predatory system going after people who are struggling, the working poor. It doesn't make any sense," said Loth.
You used to have to pay to get your credit score, but now Equifax will let you check it online for free or you could also ask your bank.
It’s to something to monitor as you want to make sure your credit score number is stable or going up and not down.
- 300-579: Poor
- 580-669: Fair
- 670-739: Good
- 740-799: Very good
- 800-850: Excellent
Source Equifax
CTVNews.ca Top Stories
Doctors ask Liberal government to reconsider capital gains tax change
The Canadian Medical Association is asking the federal government to reconsider its proposed changes to capital gains taxation, arguing it will affect doctors' retirement savings.
Keeping these exotic pets is 'cruel' and 'dangerous,' Canadian animal advocates say
Canadian pet owners are finding companionship beyond dogs and cats. Tigers, alligators, scorpions and tarantulas are among some of the exotic pets they are keeping in private homes, which pose risks to public safety and animal welfare, advocates say.
BREAKING Man wanted in connection with deadly shooting in Toronto tops list of most wanted fugitives in Canada
A 35-year-old man wanted in connection with the murder of Toronto resident 29-year-old Sharmar Powell-Flowers nine months ago has topped the list of the BOLO program’s 25 most wanted fugitives across Canada, police announced Tuesday.
Prince William and wife Kate thank public for birthday messages for son Louis
Prince William and his wife Kate thanked the public for their messages which had been sent to mark the sixth birthday of their youngest son Louis on Tuesday.
She was the closest she'd ever been to meeting her biological father. Then life dealt her a blow
Anne Marie Cavner was the closest she'd ever been to meeting her biological father, but then life dealt her a blow. From an unexpected loss to a host of new relationships, a DNA test changed her life, and she doesn't regret a thing.
How quietly promised law changes in the 2024 federal budget could impact your day-to-day life
The 2024 federal budget released last week includes numerous big spending promises that have garnered headlines. But, tucked into the 416-page document are also series of smaller items, such as promising to amend the law regarding infant formula and to force banks to label government rebates, that you may have missed.
Fire engulfs old Edmonton municipal airport hangar
A historical hangar at the former Edmonton municipal airport beside the NAIT main campus was on fire Monday night.
Soft skills, preparation can help new graduates land jobs, experts say
As new graduates enter the workforce over the next few weeks, they are likely to face challenges getting their foot in the door and must be prepared to effectively communicate what they bring to the company.
RCMP uncovers plot to sell drones and equipment to Libya
The RCMP says it has uncovered a ploy to sell Chinese drones and military equipment to Libya illegally.