When you filed for bankruptcy, I bet you swore you would never get a loan again, and whether your bankruptcy came about because of a job loss, a divorce, medical issues, or just excessive spending.
Value of the loan
In our culture, it’s a tall order, especially when you can finance everything from a set of towels to a new home that you buy through a catalog or online.
Or maybe you’re a client who recognizes the value of the loan and can’t wait to begin rebuilding.
While it is true that bankruptcy can remain on your credit record for up to 10 years, what many people do not realize is how quickly you will be able to return to the credit market after you receive your discharge. Some banks and card issuers are so interested in lending to bankrupts that they are actively trading them while still bankrupt. It’s not uncommon for people to get credit offers from credit card companies, local cars, and home-selling stores.
But you won’t fall for every offer that comes your way, will you? Some are worth exploring, but others are weird, their conditions are so bad.
Why Lenders Want to Borrow Bankruptcy
It seems counter-intuitive that a bank or other lender would be willing, much less eager, to give credit to someone who has just caused their competitors to lose hundreds or thousands of dollars.
But there are sound and rational reasons for this.
- The borrower has just discharged thousands of dollars of debt, which frees up resources (i.e. revenue) that he can use to repay his new loan.
- The debtor cannot file another bankruptcy for some time. For example, if you received a discharge in the case of Chapter 7, you cannot receive another Chapter 7 exemption for eight years.
- The creditor may charge higher interest because the borrower is motivated.
Secured against unused credit cards
Most of the credit cards you will consider will be one of two types, secured or unsecured.
- Credit card secured
When you open a secured credit card, the lender or issuer will require you to deposit the sums of money in a special savings account with the institution. The value you deposit is usually equal to the lending limit that the institution will approve on the account. The deposit works as a lender loan. If you are defaulted in the future, the lender will not be out of money as he only has to withdraw money from the deposit account to pay or repay the credit balance.
Unless it is used to pay your balance, the money in your savings account still belongs to you. After making long-term payments, many companies will allow you to convert a secured card to an unsecured card with a higher credit limit.
A secured credit card often has a lower interest rate than unsecured accounts that you can qualify for immediately after bankruptcy.
- Unsecured credit card
This is the industry standard. It is uninsured, which means that you do not put any security or collateral (e.g. deposit). If you imply payments, the credit card company has nothing to apply to your balance.
Therefore, they come for you personally.
Things to protect
In all cases, beware of two main questions:
Interest rates . Outside the gate, you can easily find yourself in an account with an interest rate of 20% or more.
Fees . Card issuers will often charge annual fees for you to participate in their program, but many who provide post-bankruptcy credit even more. Look for references not only for the annual fee, but also for
- Set up a fee
- Transaction fee
- Administrative fee
- Application Fee
It is not uncommon for a new account holder to be assigned an account with a credit limit of $ 300, but to be reduced by $ 150 in fees at the time it is accepted. For the account to be useful at all, it must pay off as soon as possible, but if not, it will pay even more in interest.
In any case, the lender won.
Offers to consider
Here are some cards that receive generally favorable reviews. Each either does not require a credit check or the lender will consider bad credit or recent bankruptcy.
Wells Fargo Secured Credit Card
- Annual fee: $ 25
- APR: 20.24 percent
- Limit / Deposit: $ 300 will get you a $ 300 credit limit
- Perks: Road assistance and cell phone damage protection.
Capital One Secured MasterCard
- Annual fee: None
- APR: 24.99 percent
- Limit / Deposit: $ 49 to $ 200 depending on credit
- Perks: Deposit security may be less than the credit limit, and you can pay it in installments; roadside assistance; car insurance.
First Progress Platinum Prestige MasterCard Secured Credit Card
- Annual fee: $ 44
- APR: 11.99 percent
- Limit / Deposit: $ 200 to $ 2,000
- Perks: Lower annual interest rate than most.
Credit One Bank Platinum Visa
- Annual fee: $ 0 to $ 75
- APR: 16.99% to 24.99%
- Limit: The initial limit will be $ 300 to $ 500 depending on credit
- Perks: 1 percent money on gas purchases.
Milestone Gold MasterCard
- Annual fee: $ 35- $ 99
- APR: 23.90 percent
- Limit: $ 300
- Perks: Choose your custom card design.