Anyone who tried to obtain a bankruptcy loan knows that chances are that he will get declined. Bankruptcy is the worst stain that can be found on a credit report and most lenders won’t even consider an application after finding out that the borrower has gone through a bankruptcy process.
Basic Facts About Bankruptcy Loans
There are some facts that you should be well aware of before applying for a bankruptcy loan. The main thing you should know is that lenders cannot legally provide you with finance if you are currently undergoing a bankruptcy process. In order to get finance your bankruptcy has to have been discharged already.
Moreover, most lenders won’t consider a loan application if your bankruptcy has been discharged in the last two years. This is due to the fact that lenders believe that that is the time needed for someone to fully recover in every sense from a bankruptcy process and that only then an applicant is reliable enough to risk lending to him.
Even if bankruptcy is the worst stain you can have, other stains on your credit report may make a lender reconsider your application regardless if he has decided to bypass your bankruptcy. So, keeping a clean credit history is essential if you want to get approved after bankruptcy.
How Equity Can Aid You After Bankruptcy
Equity loans are secured on the same asset as a mortgage loan. Thus, the lender has the guarantee that youll repay your loan or else you would suffer repossession of the property that guarantees the home equity loan. This greatly reduces the risk involved in the financial transaction and thus, bankruptcy is not such a big deal.
The risk is the key factor when it comes to lending and a bankruptcy most certainly cries out RISK but the fact that these loans have collateral implies that the risk is reduced and that the lender will recover his money one way or another which in turn, offers the applicant to get finance even with a past bankruptcy.
Bankruptcy loans And Interest Rate
Don’t expect however that even if equity aids you in bypassing the approval problem, it will help you lower the interest rate charged by the lender. Truth is that though home equity loans usually carry the lowest rates on the market, given that you have a past bankruptcy on your credit report, you will be facing high-interest rate loans regardless of this fact.
Moreover, the interest rate charged for bankruptcy loans based on equity has an interest rate that is quite similar to the rate charged for unsecured loans. Thus, be prepared to face higher monthly payments, longer repayment programs or both. The income requirement will also be essential for loan approval.