Explain APR in simple terms

[MasterBlaster]

I doubt it's a joke. I have heard lots of people do this. Nobody I know, though, as everybody I know gets loans for the old fashion reason: Not enough cash.

I don't really like the idea of paying the bank a significant chunk of change (albeit spread over two years) just to get a better credit score. The only reason I have ever heard of doing something like this is when you don't HAVE a credit history. Even in that case, I would prefer to use a credit card (pay off the balance in full each month and it will cost you nothing, unless you are foolish enough to get one with an annual fee), or a series of MUCH smaller loans. I don't think that the size of the loan has as much to do with the impact on the credit score as does the repayment of the loan. So if you are going to pay the bank to inflate your credit score, and can pay them a smaller amount for a larger inflation, why not do so?

Many uninformed people do this. Yes, paying back a loan will increase your credit score. That doesn't make it a good idea. In this case he will be loosing approx 10% each year. Liquid capital and debt to income is worth more to lenders. If he took the money he was going to use to pay back the loan and invest it in something that will make 10% in interest, then current credit score becomes a moot point because he will have collateral to back future loans. On top of that, he gets to keep his interest to re-invest.

Frog, fire your financial advisor.