Even after the economic meltdown of 2008 and 2009, people with bad credit still can find bad credit mortgages or loans. Finding one, however, will likely take a little bit of extra time and effort. After all, it just takes time sifting through all of the details to figure out whether a loan is fair or not. However, even the easiest, most favourable loan has a lot of smaller, complicated details. One such part is the Annual Percentage Rate or APR. Typically, a lot of potential borrowers tend to only look at the APR number, and it can be slightly misleading.
The APR can be taken as a total cost of a loan, once fees and other influencing factors of a bad credit mortgage is taken into account. This is often referred to as the “real cost.” It is best to think of it this way: when you close on a home, there is the agreed to price, and then final price with all of the closing costs included. The APR is the final rate once all metaphorical “closing costs” are employed. For a fixed rate bad credit mortgage loans, the APR is still fairly easy to comprehend. An APR can become misleading once a bad credit mortgage employs a variable interest rate.
Since variable rates are not locked down, it is hard to fully assess the total and final cost of the loan. Still, lenders are required to calculate and include those factors into the APR. There is a huge problem, however. Since variable rates are not stationary, it is hard to tell where they will go in the future. This is why the fine print of any variable rate loan needs to be thoroughly read. Plus, not all these loans are exactly the same, so terms vary. This is just another reason a quoted APR should never be trusted on a first glance.