Personal bankruptcy can be the beginning of a fresh financial start. To make the most of this opportunity, it pays to take what you’ve learned and incorporated it into the way you manage your finances moving forward.
One of the first questions that many people ask as they begin a new life after bankruptcy has to do with getting financing. Will they be eligible for any type of loan? Fortunately, the answer is yes. Here are some basics that you need to know about finding a lender who will work with you and what to expect.
Looking Beyond Traditional Lenders
It’s true that not all traditional lenders will rush to offer you loans. Along with the bankruptcy proper, your current credit score may make them hesitant to work with you. That means you will likely need to turn your attention to non-traditional lenders.
These are lenders who work in a different way from most banks or credit unions. They specialize in higher-risk loans designed for people who are attempting to get back on their financial feet. In some cases, the qualifications that you have to meet are less stringent than what the loan officer at your local bank will require.
Focusing on Where You Are Now
What’s different about the qualifications? The lender may not be put off by the lower credit score. The fact that you successfully completed the bankruptcy may indicate you’re worth the risk. Lenders of this type will also take into account that you have verifiable monthly income and currently have no debts other than basic living expenses.
Do keep in mind that high-risk lenders do tend to charge more in the way of interest. You’re still able to calculate the total amount that will be repaid over the life of the loan. As long as the installment payments fit into the household budget, see this as one of the sacrifices you make in order to get the money needed to take care of a pressing need.
Choosing a Lender Who Can Help Improve Your Credit Score
When approaching any non-traditional lender, always find out if your payment history is shared with at least one of the major credit bureaus. The goal is to use your timely payments to begin offsetting the older negative comments found on those reports. Doing so will mean that by the time you repay the loan balance, your credit score should be in much better shape. That will come in handy when you want to secure another loan.
Managing the Loan Repayment Responsibly
Being approved for the loan allows you one more way to put what you learned in those debt management classes to good use. Make sure that the loan payments are one of the priority line items in your monthly budget. Make each payment on time. If you can make an extra payment now and then, do so. The goal is to train yourself to take care of essentials first and then spend the remaining income on things that you want but don’t necessarily need.
Have you recently completed bankruptcy and need a loan to take care of an auto repair or some other pending issue? Check out the personal finance blog and learn more about how to find the right loan for you. The process will be a lot simpler and faster than you expected.