Getting Loans After Bankruptcy

Most people will find filing for bankruptcy a decision that is not easy to make. This is because their credit rating will suffer tremendously in effect making lenders view them as a bit of a bad risk. Indeed a person whose credit score after bankruptcy can be termed as good or one with an average score may see their credit score reduce by a margin to the extent of 100 points after a bankruptcy. The good news though is that a bankruptcy offers one a very good way of obtaining a new financial life. This is because one may still be able to obtain alternative methods of financing other than the traditional unsecured loans.

In this piece, we take a look at some of the alternative sources of financing that one may be able to turn to turn to after filing for bankruptcy. Take a look at the following ways of obtaining bad credit loans:

Secured Credit Cards

To begin reestablishing one’s credit it is advisable that you start small. Secured credit cards or bad credit personal loans can offer the best option for anyone with a bad credit wishing to obtain a credit card. To get this card, you will be required to pay a certain fee to the card issuer. The amount paid then acts as your line of credit. Depending on the credit company you sign up with, the limit to the amount you can access is in the region of between 100 to 200 percent of the amount you had deposited. Using secured credit cards has the following advantages:

The first advantage is that it offers you a chance to repair your credit. This advantage is not present when you decide to pay by cash only.

Secondly, it helps you begin to establish good ties with your credit card company. This is especially the case where you make all payments on the secured card on time. This may allow the credit provider to increase your credit line above the amount that you had deposited with them.

Thirdly, it also allows you to make purchases from stores that only accept cards. Where you do not have access to a debit card this option becomes useful.

The most common cause for concern when using the secured cards or installment loans  is the fact that you are required to first pay a huge chunk of the money you intend to borrow. However, considering the advantages as discussed above, secured cards make sense in the long term for anyone wishing to repair their credit.

Bad Credit Personal Loans

These are usually designed for people with a poor credit score. They are usually useful where one wishes to take a loan but their poor credit makes them struggle to be accepted by lenders. Bad credit personal loans exist as either secured or unsecured. However, it is more likely that coming from bankruptcy most lenders will only allow you access secured personal loans. Apart from the traditional lenders, these loans may also be sourced from credit unions or online lenders. Ensure that you pay the full amount on time as it will help your credit score improve.

Bad Credit Car Loans

These loans are available where you wish to purchase a car but you have bad credit rating. They are usually secured by collateral which has the effect of allowing the lender to repossess the car if there is a default in the repayment of the loan. This therefore makes them easily available as compared to other loans because a vehicle can be easily repossessed thus reducing risk on the lenders part.

Usually, different lenders will offer different rates on car loans for people with bad credit based on interest depending on the criteria used to rate the risk involved. It is therefore important that you compare the rate of interest being offered by the various lenders before signing up for this loan to ensure that you get the best available deal. Another important issue to consider is to look at the total cost of the loan instead of the monthly installments to be paid. Some dealers will try to entice you by showing you the low monthly payments which will tie you down to a longer period of repayment. Long repayment periods will only increase the cost of your loan. In this regard also be on the lookout for extras that your dealer may insist that you purchase. These extras only add to the cost of the loan. It is advisable that when looking for these loans, have a friend with you who will act as a voice of reason. In this way you shield yourself from being taken advantage of.

Payday Loans

These loans allow you to borrow small amounts of money on the understanding that the amount advanced will be repaid when you receive your payment check. It usually attracts a very high interest rate and is therefore to be avoided unless the borrowing is short term and is extremely necessary.

Auto Title Loans

Auto title loans enable the borrower to access credit from a lender using their car as security. Therefore the borrower must be the outright owner of the vehicle. It is an effective way of obtaining cash as it mostly considers the car title instead of your credit score. The biggest determinants of the size of the loan available are the value of the vehicle and the ability to repay the amount advanced.

Filing for bankruptcy need not inconvenience you in accessing financing. With the alternative ways of accessing bad credit loans as discussed in this article you will still be able to access financing from various lenders.