Why Post-Bankruptcy Personal Loans Are So Accessible

It is understandable that people would think the last applicant a lender is going to approve is one that has only recently come through bankruptcy. No-one can be faulted for expecting it to be so, but the simple truth is that post-bankruptcy personal loans are not very rare at all.

Many lenders recognize the wide variety of reasons behind seeking bankruptcy, with bad luck one of the most common. Many bankruptees are honest borrowers that were caught out by economic circumstance, so as long as their situation has improved there is no reason to reject their application.

With this in mind, the chances of bad credit borrowers getting loan approval with poor credit histories are quite strong. After all, the bottom line is that any applicant seeking a personal loan needs to be able to make repayments over the duration of the loan. Therefore, credit histories are not really that important.

Bankruptcy: The Consequences

It may seem that filing for bankruptcy is the only practical solution to financial problems, and in certain cases this is certainly true. But there are consequences to making such a move when it comes to rebuilding your credit reputation. Without doubt, getting a post-bankruptcy personal loan is a useful way to begin that rebuilding work, but the terms will not be ideal.

The image that bankruptcy has is chiefly negative, though lenders will often recognize there was no alternative action to take. But they do get nervous when considering loan applications from bankruptees. After all, bankruptcy means that debts were written off but never fully repaid.

Seeking loan approval with poor credit histories is one thing, but with a proven history of escaping debt repayments, some lenders apply very strict terms to any new personal loan so as to cover the increased risk of default.

Establishing An Ability To Pay

The key to establishing an ability to make the required monthly repayments is to show that your source of income is dependable and your existing debt commitments are low. It is with the latter issue that those applicants seeking post-bankruptcy personal loans have an advantage over regular applicants.

Bankruptcy basically means that all existing debts are cleared, whether a percentage of that debt is paid or not. But while there may be some stigma over the unpaid share of the debt, the fact remains that these applicants have no debts to their name. And with no debts to worry about, the debt-to-income ratio is very strong, so getting loan approval with poor credit histories becomes easy.

With regards income, the applicant needs to show that they have a full-time job, and have held it for a minimum of 6 months prior to submitting the application. This is a straightforward requirement for most personal loan applications.

What Terms Should Be Expected

The terms that come with post-bankruptcy personal loans cannot be expected to be great. However, there are some factors that, if addressed, can help in getting the green light. For a start, your status as bankruptee will mean a higher interest rate is charged, but keeping the size of the loan application down can counter the over-expense.

Lenders place a limit on the loan sum available to bad credit borrowers and will expect collateral to be provided in exchange for approval with poor credit histories. Collateral needs to match the loan itself, but when seeking an unsecured personal loan, the limit can range from $5,000 to $10,000.

Also, getting a cosigner – someone willing to guarantee monthly repayments will be made – is another way to ensure approval and keeping the interest rate down.

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An Introduction To Bankruptcy Personal Loans

Filing for bankruptcy is not really the end of the world. You can successfully overcome it. Securing a bankruptcy loan is one way of regaining your financial strength. This will help you get your own house and automobile, even after you are declared bankrupt.

Before securing a bankruptcy loan, your case would have to be discharged and all creditors paid. If you have applied for Chapter 7 bankruptcy, then it is mandatory to wait for two years before asking for another loan. First of all, you have to show the capacity to pay off your loans in order to show that you are no longer a high-risk borrower. To demonstrate this, pay all you bills on time and use your credit cards responsibly. Reference letters from credit card and utility companies will help in you getting credit once again.

You could also get “secured”” credit cards after putting up an amount of money in an account at the bank. This guarantees payment, and the credit limit is the same as the security deposit. It is increased as the debtor proves his or her capacity to pay off the debt.

If you are in deep debt, loans are given to pay off debts. The debts could be consolidated into one loan to be repaid by a financial institution. If you choose one with a lower rate of interest, it could help you in the long run to take care of current expenses as well.

Debt consolidation loans should be treated as a last resort to repay your loans because they could push you further into debt. If the repayment is too low, it could mean that interest rates are high, so you could be paying more than you currently owe. If there are add-on services like insurances, these could actually mean extra interest rates. If you get a secured loan, it would mean that you could be putting up an asset like your home as collateral. If you are not careful, you could lose your home.

Before you opt for loans during or after bankruptcy, be aware of all the pitfalls. Debt management should be on-going task, and it should never land you into trouble.

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