Loans After Bankruptcy

We all will probably need a loan at some time in our life. It might be to handle an emergency, to finance a home project, or to pursue a business venture. You may need a loan for a new car or to further your education or your child’s, you may even be in the market for a new house. Even if you have filed for bankruptcy, you will probably have the types of purchases in mind, at some point. Bankruptcy does not have to be a closed door to your aspirations. There is no reason it has to keep you from obtaining a loan or line of credit when you need them for any of the above circumstances. Extra cash can be available when it is needed.

Most major lenders may attach certain conditions to a loan application from someone who has declared bankruptcy in the past. (This may vary with lenders who specialize in bankruptcy lending situations.) There are generally three things that borrowers will have to accept when they apply for a loan after bankruptcy.

First, you will need collateral. Some type of collateral will be required as security, in order to receive a loan, because most lenders see bankruptcy as a risk. Collateral can include assets of value such as houses, cars, real estate, or other valuable processions. These will be used as repayment on the loan in case the borrower defaults on the loan payments.

Second, you will have to pay higher interest rates. When you have a poor credit history and especially a bankruptcy on your record, you are a very risky borrower, according to the lender’s perspective. Many lenders feel this means the borrower will likely miss payments and be late with payments or possibly default entirely on the loan. In order to compensate for this, the lender will offer the loan at a higher interest rate to the recent filer of a bankruptcy. These borrowers will likely pay an interest rate which is at least one or two percent above the average rate. Typically, this means that you will have to pay at least one to two percent higher interest rates than the average.

Third, borrower may have to pay higher finance charges. These efforts to manage risk may be carried over to other financing fees. These other financing fees may be annual fees on credit cards or late payment charges. These high charge fees are all a part of doing business with high-risk borrowers such as those who have filed bankruptcy. Lenders have no other means of offsetting the losses incurred by defaults.

It is possible to obtain loans and lines of credit after bankruptcy, but be prepared to pay more for the money that you borrow. You need to do research to discover the terms and conditions that may apply to you, as the borrower seeking a personal loan subsequent to declaring bankruptcy. You may feel that the extra cost is outweighed by the benefit of securing a loan.

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