A national credit counseling expert says consumers pay more--a lot more--for credit after filing bankruptcy.
Steve Rhode, president and founder of Myvesta.org, says families with clean credit pay an average of $1,100 each month for mortgage and auto loans. Because of higher interest rates, a post-bankruptcy family pays almost $1,900 for the same items.
A mortgage of $132,930, with a fixed interest rate of 6.75% for 30 years, translates to a monthly payment of $862. For post-bankruptcy filers, the interest rate jumps to 13%, and a monthly payment of $1,470.
An auto loan of $17,000, with an interest rate of 9% for a five-year term, translates to a monthly payment of $353. After bankruptcy, the interest rate jumps to 15%, and a monthly payment of $404.
The average credit card interest rate jumps from 17% to 24% for people who’ve filed bankruptcy. With a credit card debt of $2,800 at 17%, you’d need about 32 years to pay off the debt by making only minimum payments. At 24%, you would never pay off the credit card debt; interest costs would keep payments going for eternity.
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