Friday, March 23, 2012

How Lenders See You Post Bankruptcy

There are many reasons that your financial situation may have led you to file bankruptcy. Perhaps you experienced job loss, layoff, injury, or illness that prevented you from working and keeping up with your payments. Maybe you made a lot of past mistakes with your finances and became smothered in debts that you could no longer afford to pay. Whatever the reason, if you are just coming out of bankruptcy, you have a new opportunity to rebuild you borrowing reputation.

Your New Borrowing Image

Re-establishing your borrowing credibility once your bankruptcy proceedings have been discharged can be tough - you have just walked away from numerous debts and demonstrated to the lending world that you are will not hesitate to let someone else absorb loss on your behalf. In this way, your reputation as a borrower is soiled, and many lenders will not look at your application because of it for at least ten years.

On the other hand, there are banks and lending institutions that see you as suddenly becoming a potential borrower who brings no debt to the table with them. If you have a fairly good job, they see you as a great potential customer - especially if you have been working for the same employer for a very long time (at least five years).

These lenders are well-versed in bankruptcy law, and they know that it will be quite awhile before you could file bankruptcy again. In their eyes, this means that if they grant you a short term loan then they are nearly guaranteed payment from you - if not, they can file a judgment against you and garnish your pay. In this instance, your recent bankruptcy and good work ethic makes you less of a risk than someone who has been working for just a few months, or switches jobs frequently. In sum, borrowers with good work histories are more likely to qualify for a post-bankruptcy loan than those who have scant working histories.

Collateral & Cosigners

If you have collateral left after bankruptcy, such as a home or late model automobile, you can further increase your chances of receiving a post-bankruptcy loan by pledging collateral security. Lenders will see you as less of a risk. Additionally, you might consider applying alongside a creditworthy cosigner who can stand good for you should you fail to honor the terms of your agreement. Your cosigner can be your parents or other relatives, friends, coworkers, or anyone who trusts that you will pay your loan in full.

Start Small And Work Up To Bigger Amounts

Because you are building your credit file back from scratch, you will most likely not qualify for exorbitant amounts of money. Most post-bankruptcy loans begin around $1,000 and go up to $5,000, until you get more points on your file and prove yourself to your lender.

Online lenders are typically more lenient as opposed to banks in your hometown when it comes to loaning money after a bankruptcy discharge. You will most likely find rates that are more competitive and stand a better chance of approval by using an online lender.

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