Predatory Lending

I also feel like I might have a bit of a rant in me this evening. I'm sure many of you have heard those radio commercials for car loans, credit-yes, joe-says-yes, dick-says-yes, free-credit-report, etc. I'm sure many of you have also heard a bit in the news about the housing "crisis," and the trouble we are in due to "sub-prime" lending and the house of cards falling. Well I was just thinking about putting those two things together.

I find the term "subprime" or "subprime loans" itself to be a bit confusing and misleading, because what it means is that the rate on those loans is above the typical interest rate, because the borrower's credit worthiness is "sub" that which is normally acceptable. Much hullabaloo is now being made on how to fix that mess that was caused by nothing more complex than greed on the part of the lender. Banks have had standards for a reason, and when they consistently relax their standards it's bad news.

So with this recent information in the news about the disaster that type of lending is in the housing market, why is no one rushing to silence these predators that are seducing people into car loans that they can't afford? Is it because a large group of people going default on auto loans will not have a negative effect on the economy? I don't know the economics of the situation, but that mechanism seems on the surface to be one of the ways that increase the gap between the rich and the poor.

The bottom line is that vehicles are money pits, one of the worst things to have a large chuck of your income tied to. I think high gas prices are beginning to make this more obvious, but a car is not an investment, it is a sunk cost. And the lust for a new pretty one that infects this country holds the lower and middle classes down. I'm with Mr. Ramsey now that no one should have a car payment, ever. I fell for it and had to bail. And I have plenty of friends that have newer cars that can make the payments no problem, and enjoy it. But I'm convinced that if you want to get ahead, a nice car is not part of the picture. Reliable yes, nice not so much.

But credityes.com is driving me nuts. Not just the ads, but the premise. I just want to scream back, NO! No you don't need a nice car. You're only causing yourself pain. The whole premise of car payments is whack, but if even the banks don't think you can handle a loan, take the hint buddy. Save yourself and tell Dick to go to hell with his crappy loan. It's the same thing as subprime morgages people, and it only hurts the little man. Tell your friends to just say NO!