Bankruptcy loans are meant to help those who have undergone a bankruptcy to recover from their financial situation and re-establish their credit. The process of rebuilding your credit when you have a bankruptcy on your record is neither easy nor fast but a bankruptcy loan is an excellent first step.
A continuous and uninterrupted repayment of a bankruptcy loan contributes to repairing your credit. It shows credit worthiness and will eventually help you to reach good credit again and return your ability to obtain finance at more reasonable interest rates.
The opposite is also true, if you fall behind your monthly instalments or miss a payment, your credit score will end up reaching a point of no recovery, shattering your ability to get finance for many years to come. When it comes to your finance you can never be too careful, if you think you might not be able to repay the loan, don t risk it. Wait till your income guarantees your ability to repay and only then apply for a loan, there are more chances you ll get approved and you ll also avoid getting into more financial difficulties.
Differences between Chapter 13 and Chapter 7
Bankruptcy loans are usually requested after bankruptcy has been dismissed. There is a difference between Chapter 13 Bankruptcy and Chapter 7 Bankruptcy. The first one, since it s a reorganization process, prevents you from applying for a loan of a considerable amount till all the creditors debts are paid off. Chapter 7 on the other hand has a period of time (usually lasting two years) that needs to be exceeded before you ll be able to apply for a loan.
Bear in mind though, that even though the above is true, each lender has its own requirements. There are many lenders that won t lend to an applicant who has gone through a bankruptcy till 10 years since it s dismissed. Don t despair though; there are also many lenders willing to approve your loan even immediately after a bankruptcy as long as you can meet other requirements.
Rebuilding your Credit
In order to show a good financial behaviour, you need to never miss a payment again; all your bills need to be on time. Using a credit card, even if it is a secured credit card will improve your credit score. Credit worthiness depends on this kind of things; you need to show the creditors you re reliable and that the risk of lending to you is not high as it was when you filled for bankruptcy.
Going through bankruptcy can be very stressful but there is no need to continually suffer the consequences of past financial mistakes. Once you commit to live making sure the amount of your expenses is always less than your income you ll be able to recover your credit and become debt-free.
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