Life After Bankruptcy: Can You Get a Loan?
Refinancing after bankruptcy can be a challenge, but establishing a good credit after bankruptcy can be done with the right lender.
Establish good credit to prepare for refinancing
Generally you will have to wait six months after the discharge of your bankruptcy before refinancing. During this time it is crucial to start rebuilding your credit. A refinance itself will aid in rebuilding your credit within two years. However, in order to get a refinance or apply for a loan, you need to start rebuilding your credit immediately after bankruptcy. You can accomplish this by beginning to make purchases on credit and make your payments on time. You can also build a savings account. Cash assets will increase the appeal of your application for a refinance to a lender. How can you make purchases on credit if you have no credit? Consider credit cards that require an annual fee, a "sign-up" fee and a savings deposit. You send the company $500, for example, and they will give you a card with a $500 limit. It's a bit expensive, but it works.
Research and know your lenders
Research lenders and refinance rates in order to make sure the lender you choose will provide the best deal available. The Internet is a valuable source to use for these comparisons. You can often get online quotes for a refinance. The better deal will often have a higher interest rate, but lower fees. You will likely need to work with a sub prime lender due to your bankruptcy. Interest rates will typically be a few points higher than a traditional mortgage.
Choose the best refinance package for you
As part of a refinance, you may have the option to take some of your home's equity in cash. This would allow you to buy a new car or make improvements to your home like a traditional home equity loan. Keep in mind that leaving the equity in your home will improve your credit rating. After bankruptcy improving your credit rating is always an important consideration. This refinance will help to improve your developing credit and after two years you may be eligible for a lower interest rate through another refinance. If you have continued to build a solid credit history after bankruptcy, you should be able to obtain a refinance through a traditional lender.
Individuals wanting to remedy the stresses of their current financial situation file chapter 13 bankruptcies. You would want to file a Chapter 13 bankruptcy if you have a large of amount of assets and some debts that may not be dischargeable in bankruptcy. In Chapter 13 bankruptcy, instead of having your assets liquidated as in a Chapter 7 bankruptcy, you make arrangements to have all of your creditors paid.
The positive impact of Chapter 13 bankruptcy on your finances
Creditors look more favorable upon you if you have filed a Chapter 13 bankruptcy as opposed to a Chapter 7 bankruptcy. In filing a Chapter 13 bankruptcy you have taken steps to ensure that all of your creditors are paid what they are owed over the next few years. Creditors will view a Chapter 13 bankruptcy more favorably when it appears on your credit because they know that your past creditors received payment on the debts they were owed. In addition to the favorable outlook of future creditors, your current creditors will continue to look at you as someone who does not walk away from the debts they owe.
The negative impact of Chapter 13 bankruptcy on your finances
A Chapter 13 bankruptcy filing negatively impacts your credit. If you are unable to pay your bills and you own a home and you are being threatened by foreclosure, Chapter 13 is a good option. Creditors will view the Chapter 13 bankruptcy as an indication that you were not capable of managing your finances. Creditors will flag your credit as high risk because of a Chapter 13 bankruptcy. This can make it more difficult to obtain any sort of financing or mortgage approvals. In addition, a Chapter 13 bankruptcy will stay on your credit report for the next seven to ten years. Any creditor you views that report will know that you have had financial difficulties in the past and may question your future ability to pay because of the Chapter 13 bankruptcy.
The easiest way to begin searching on the Internet is to type in "Chapter 13 bankruptcy" in the search bar in whichever search engine you are using, the best results will be listed from top to bottom. Before filing for Chapter 13, make sure that you way all of your options. You want to check out all the listings and see what they have to offer, and maybe even contact them if you feel the need too. With using the Internet you have hundreds of companies at your disposal, you can narrow your search by going just local, or maybe looking for specifics like having a really large amount of debt that you want consolidated or a relatively small amount.
About the Author
Andy Gorton is the founder of Fresh Finance who provide debt solutions to UK residents www.freshfinance.net
