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Loan after bankruptcy A nightmare sometimes

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by: No more debt !
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Date: Tue, 7 Jun 2011 Time: 9:22 PM
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Apart from the hurdles faced by the individual before and during filing of bankruptcy, it's after effects are also immense. Bankruptcy seals your credit score for the next ten years.  Re-establishing of credit can be done only after that, through your frugal living and wise spending.

There are basically two main chapters under which you can file for bankruptcy, namely chapter 7 and chapter 13. The former is defined as straight bankruptcy where liquidation of assets takes place, whereas the latter makes the filer go through a repayment plan.

Post bankruptcy, life becomes difficult for the filer as his financial life meets with lots of limitations. In this edition, I have tried to bring out the relevant details pertaining to personal loans after bankruptcy.

Obtaining unsecured personal loans after bankruptcy filing can be tough, but I would never say impossible. You might find it hard to search and locate lenders, lending money to an individual who has already filed for personal bankruptcy, but never impossible. Could be, that you would be required to shell out excess money, paying higher interest, due to the black tag of bankruptcy associated with you. This is because once you have filed for bankruptcy; you are viewed by the lenders as high risk borrowers.

There are basically four chief factors which would determine your loan availability after bankruptcy. They are

Credit Score.

Existing debt

Collateral

Time

Credit Score- Your credit score suffers a lot when you file for bankruptcy and would remain so for a pretty long time. Finding a lender who would not consider your poor score as well as your post bankruptcy status would be hard, but never impossible. Terms and conditions could be hard even if you find one, but one should be prepared for the same, like for e.g. you might need to pay a higher amount of interest for the amount borrowed in comparison to the other non-bankrupt borrowers.

Your existing Debt: It could be that you have accumulated lots of debts even after you have filed for bankruptcy. If so, ensure that you have minimized debts, as this could be a concern for the lenders to lend money. They might fear of losing their money, in cases you file for bankruptcy once again. Rejection of loans on such instances could be higher.

Collateral: If you have any asset to be kept as collateral, then your loan application process becomes easier. This reduces the risk of the lender as he is assured of getting his money back. You can even get the loan on softer terms!

Time: Try to avoid immediate application of loan post-bankruptcy. Exhibit financial discipline and try to improve your credit score. Though it won't recover very soon, but ensure that your inappropriate spending does not leave you in a bad financial mess.

About the Author

To know more on availability of loans after bankruptcy, take expert advice from our team at Best Debt Care


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