After Bankruptcy Loans

Bankruptcy is not only a financially debilitating experience but it also pulls you back psychologically. Things change dramatically after bankruptcy for an individual, and picking up the pieces and continuing your life is not easy. So many bankruptcy questions and answers buzz through your mind! A Chapter 7 bankruptcy would wipe out all your assets. A Chapter 13 bankruptcy will give you the option to pay off your debts within the next 3-5 years, but will still leave a huge burden for you to clear. So either way, life after bankruptcy is tough. But one has to move on. One of the best ways to improve your credit score is to get a loan and pay it off on time.

Stage I
The commonest among the post bankruptcy questions that most people have are: Where to start? Will i get personal loans after bankruptcy? A bankruptcy means a bad credit score and high interest bad credit loans, if any. And unless you display your creditworthiness, which you can by paying off your loans, you cannot increase your credit ratings. A Secured loan is one thing, but a Chapter 7 bankruptcy would wipe out all your assets, so what can you offer as security?

In my opinion, the first thing you need to do is to get a secured credit card. A secured credit card requires you to maintain a minimum balance in your account, which is used as security. If you use this credit card responsibly and make regular payments on it, your credit score will improve. Thus a secured credit card will help improve your credit rating. And with a bit of research, you could even find a credit card with a low application fee and annual fee. If you're lucky, you may also get a credit card which is convertible and allows you to get back to normal unsecured credit card use once your credit score improves.

Stage II
One of the benefits of bankruptcy is that short-term loan after bankruptcy discharge will be quite easy to come by. Confused? Bankruptcy rules state that once you declare bankruptcy, you cannot go for bankruptcy filings again for up to 8 years. Hence the lenders can be well-assured of the payments on short-term loans. The constructive thing to do is to use these short-term loans to buy assets. If you can rebuild a good asset base, then it will help increase your credit score. So use these short-term loans to buy low to medium-risk investments. Some people prefer taking home loans. But the problem is that home-loans are long-term and unless you have a renegotiable interest rate, you will have to pay a high rate of interest for many years. So I think it would be better if you take short-term loans, pay up, improve your credit score and then get another term loan at a lower interest rate. The other benefit is that if the investment gives you a return which is higher than the installment amount, you stand to gain monetary benefit along with improving your credit score.

About renegotiable rate mortgage loans, most people are unaware of these, but they are absolute boons to people looking for loans after bankruptcy. If you are very dedicated to improving your credit history post-bankruptcy, but need a loan urgently, you could apply for a renegotiable mortgage loan. The lender of this loan periodically verifies your credit rating and the improvements in your credit score, and if satisfied, agrees to lower the interest rate on the loan. This type of loan gives bankrupt people a chance to save up on interest, use credit money responsibly and improve their credit scores too.

Stage III
This credit score improvement period will last for a year or two. If you have been diligent in your efforts at improving your credit history, you will certainly be rewarded with a marked improvement in your credit score. So then you can take up home loans or even auto loans. But make sure that you keep paying your debts on time. As long as you keep your credit score up, no lender can deny you an after bankruptcy personal loan.

You can indeed get a loan after bankruptcy. If you thought that life after filing for bankruptcy will be too arduous, think again! What you need to have is a positive outlook and the desire to work hard.