People who file for bankruptcy often have issues with their income, debt and/or credit that prevent them from being able to qualify for loans. This does depend on the type of bankruptcy the person filed for as well as what their financial status was prior to filing for bankruptcy. However, it is also fairly simple to make generalizations as to how challenging loans for people with bankruptcy will be to obtain.
Loan options can be narrowed due to the restrictions most lenders place on borrowers who have filed for bankruptcy. Unfortunately, bankruptcies have become common since the recession. However, more lenders are open to providing loans for people with bankruptcy.
These types of loans are generally approved by lenders for borrowers who are considered low risk. Low risk borrowers generally do not have a bankruptcy on their credit file, and if they do have one, it has been discharged for several years.
Debtors may be required to pay higher rates of interest while receiving lower loan amounts. They can be approved if they are willing to wait for their loan application to be reviewed. For example, there are many mortgage lenders that will approve a loan for a person who has filed for bankruptcy as long as the bankruptcy is over two years old. This will prove to the lender that the borrower has been financially responsible since the bankruptcy.
A bankruptcy can prove to be detrimental to a person’s credit rating. In fact, a bankruptcy alone can drop a person’s credit score a hundred points or more. When this is combined with other credit issues such as student loan default and it can be difficult for borrowers to get the funding that they need. A borrower will have to place a lot of focus in finding a lender with more lenient lending qualifications.
Loans for Bankruptcy
Bankruptcy loans are loans that are specifically designed for those who are in the bankruptcy process and do not have any other choices for lending. Although these types of loans are easier to get approved for, they also come with several risks.
The loans often carry a high interest rate, and this can create added debt issues. The debtor may also need to get the bankruptcy court’s approval before applying for the loan.
Loans for people with bankruptcy can help debtors who are looking for alternative forms of lending for vehicles, mortgages or other reasons. Consult with an experienced bankruptcy attorney to learn more about the options available to you for your specific needs.
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