People filing for bankruptcy are often swimming in debt from multiple sources of credit. The average American family has four credit cards with thousands of dollars on each. With so many people failing to save money and spending more than they can afford, problems with managing credit is on the rise. However, the majority of people that file for bankruptcy are not those who simply overspent, but those that have fell under unexpected hard times. Medical debt is the largest source of debt forcing people in bankruptcy protection. The second is job loss and the inability to keep up with mortgage payments. Many hardworking Americans have become a victim of this tough economy through no fault of their own, leaving them with few options. Although the bankruptcy process is noted on one’s credit report, getting credit and loans after a bankruptcy is not impossible.
How To Secure A Loan After Bankruptcy
Begin to repair your credit. People often neglect their credit until it is too late. The best way to repair your credit after a bankruptcy is to make your payments on time. If you have any existing lines of credit or loans that were not eliminated through bankruptcy, prioritize making the remaining payments on time every month. A stable payment history will reflect positively on your credit report, showing potential creditors you are capable of paying responsibly. If your debts were repaid through a Chapter 13 plan, get a letter from your previous creditors indicating you satisfied your payments and that you no longer owe any debt to them. You can provide your potential lenders a copy of this letter to show your delinquent accounts have been corrected.
Obtain a small secured loan. Applying for a secured loan, puts some of your property up against the loan as collateral. If you default on the loan, the lender has the right to seize the property in efforts to satisfy the loan. You should only apply for a secured loan if you are certain you can afford the monthly payments on the loan. The idea is to obtain a small, manageable loan to make consistent payments towards, to show a positive payment history. Even a loan for $500 will put you on the path to a better credit standing, and improving your chances of obtaining a better loan in the future.
Get a someone to co-sign for you. Secured loans can be risky; especially if you are not sure your finances will remain stable. If you have determined that you are able to pay small monthly payment on a line of credit, consider applying for a small unsecured loan. A lender may agree to provide you a loan if a family member co-signs on the loan. Having a co-signer on your loan application protects the lender in the event you default on the loan, by holding the co-signing party responsible for the repayment of the loan.
It is your responsibility to use credit wisely, any further neglect to credit or loans will only damage your credit history further. Be patient! If you are experiencing a financial hardship, you may want to wait until your finances are in order before taking out a loan. Remember the best way to improve your credit after bankruptcy is to avoid making the same mistakes.