When looking for quick, emergency funding, most people may turn to a loan. If an individual has past-bankruptcy, they may have additional questions—such as whether or not past-bankruptcy will be okay when trying to obtain a loan. Bankruptcy is actually not that uncommon for many Americans anymore, and so the lending industry has adapted to reflect that commonality. Here is more information on how loan lenders work with clients who have a past-bankruptcy.
Loans That are Okay for Those with Past-Bankruptcy
In the lending industry, there is a type of loan that may be available for those who have poor credit or past-bankruptcy. This type of loan is called a secured loan—a loan where the borrower offers an asset as security against the loan. There are several kinds of secured loans out there. Here are a few examples:
Car Title Loans
These are loans where the asset is the borrower’s vehicle title. Car title loan lenders may not factor in a past-bankruptcy, and will instead take into consideration the value of the vehicle being offered for a loan.
Home Equity Loans
These are loans that are taken out against the value of the borrower’s home. Because lenders have such a large form of security, they may not factor in a borrower’s past-bankruptcy.
Personal Loans
Personal loans are a type of lending that can be used for any kind of purchase/expense. Lenders will traditionally factor in a person’s credit and past bankruptcy, but some personal loan lenders give their borrowers the option of including an asset for eligibility. This asset can be anything from jewelry to a home.
Payday Loans
These loans work with the cycle of the borrower’s paycheck. Lenders may not factor in past bankruptcy because they have access to the borrower’s bank account and the loan is relatively small, especially when compared to other forms of lending.
A Few Characteristics of Secured Loans to Watch Out For
Before considering obtaining a secured loan, it is important to consider a few things that come with this type of lending.
- The Interest Rates: Any borrower with past bankruptcy will be regarded as a high-risk client based on their credit profile. To compensate for this, lenders who give out secured loans will usually equip them with high-interest rates.
- Possibility of Losing the Asset: When obtaining a secured loan, borrowers should be aware that they may lose their asset if the loan enters defaults. So as a borrower, it is extremely important to think about how affordable the loan is.
- The Length of the Loan: Secured loans usually tend to be pretty short. This means that the money borrowed, and the interest accumulated will have to be repaid fairly quickly. This is an important factor to consider before taking out one of these loans.
What Will Lenders Look for to Determine Eligibility
It may be helpful for a potential borrower to know what qualifying factors a lender will look for. Here are some things a secured loan lender may look into:
Income
Lenders will highly take into consideration the household income of the borrower. Keep in mind that the borrower will have to prove any income that they claim. This is usually done through bank statements, pay stubs, or appropriate letters.
The Value of the Asset
In many cases, the value of the asset will play a role in determining eligibility and the value of the loan itself.
Ability to Repay the Loan
After looking at the two factors listed above, some lenders may ask about expenses to try and gauge if the borrower can afford to repay the loan. Lenders will also try and estimate how quickly a loan could be repaid and in what terms.
Where is it Okay to Find a Loan with Past Bankruptcy?
For those with a past bankruptcy, the easiest way to find a loan may be through a loan financial service. These are loan connection services between lenders and borrowers, and they work with all kinds of lenders that may overlook past bankruptcy. Loan financial services also have helpful information and resources to help borrowers better understand the lending process and their finances as well.
Trying to find a loan with past bankruptcy may seem challenging. However, requirements in the lending industry have grown flexible and have expanded to reflect the finances of many Americans. Secured loans may make it easier for those with past bankruptcy to find funding. Before obtaining a secured loan, it may be helpful to understand a few details about them. When looking for a loan with past bankruptcy, a loan financial referral service could make the search quick and easy.
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