Connect with us


Can You Get a Loan After Bankruptcy?



When you’re going through bankruptcy, applying for a loan might be the furthest thing from your mind. The process leaves…

When you’re going through bankruptcy, applying for a loan might be the furthest thing from your mind. The process leaves your credit in tatters — but that can change in a few years’ time if you make a consistent effort.

“People can absolutely recover from bankruptcy,” says Jordan van Rijn, senior economist at the Credit Union National Association. “It just takes time and quite a bit of patience.”

If you’re considering loans after bankruptcy, expect to wait at least a year or two before qualifying for traditional loans. But don’t count out other options. Here’s what you need to know.

What Is Bankruptcy?

Bankruptcy relieves most, if not all, of your debts but comes with a price: a damaged credit record and lower credit scores.

Two of the most common types of personal bankruptcy are Chapter 7 and Chapter 13.

In Chapter 13 bankruptcy, you can keep assets like a house or a car as long as you have a reliable income. You can get court approval for a repayment plan over three to five years, after which your debts will be discharged.

In contrast, Chapter 7 requires you to liquidate all eligible assets, although some items — such as cars and furnishings — could be exempt. And your income cannot exceed an amount designated by the government.

How Does Bankruptcy Affect Your Credit?

Bankruptcy will dramatically affect your credit score, and it will remain on your report for seven to 10 years, says Rod Griffin, senior director of consumer education and advocacy at Experian.

Discharging debt can help you start anew, but it doesn’t wash away the months or years of financial issues, such as missed loan payments and out-of-control balances. Those marks on your credit report will hurt your credit score for quite a while.

[Read: Best Bad Credit Loans.]

“After a Chapter 7 discharge, your credit scores will not necessarily bounce back. Although the accounts discharged in bankruptcy will no longer show a balance owed, they will still remain on your credit report,” Griffin says. “The status will show they were discharged in bankruptcy, and any late payments that occurred prior to when the bankruptcy was filed will also remain on your report for up to seven years.”

How Can You Raise Your Credit Score After Bankruptcy?

The most important task after bankruptcy is to repair your credit, which will eventually help you get approved for credit cards and loans again.

“The key to rebuilding your credit score is to have an open, active account with a history of on-time payments,” Griffin says.

Some consumers are able to keep an account or two when going through bankruptcy, which is called reaffirming the debt, Griffin says. “If this is the case, make sure every payment is made on time going forward so that you can show lenders you are managing the account responsibly,” he says.

A good way to start your road to credit recovery is to apply for a credit-builder loan. These are short-term loans that range from about $200 to $1,000 and are not used as an investment or to purchase anything in particular, van Rijn says. You can usually find them at credit unions or community banks.

Griffin suggests other ways you can build your credit score after bankruptcy:

— Apply for a secured credit card, a card with a credit line of usually less than $1,000 that is backed by your own money. Work with a bank or credit union where you already have a checking or savings account. If you make your payments on time for a while, you’ll likely move up to an unsecured card.

— Become an authorized user on an account. This could improve your credit score if the account is in good standing.

— Get a co-signer for a credit card or loan.

— Use a tool like Experian Boost or UltraFICO, which factors alternative data into your credit report by monitoring things like rent and utility payments. However, lenders might not use this data for your loan application.

How Long Does It Take to Get a Loan After Filing Bankruptcy?

For some loans, you’ll need to wait at least two years after bankruptcy before applying. You want to have a positive credit record and plenty of time between your loan application and bankruptcy.

[Read: Best Personal Loans.]

“It may be difficult to qualify for a loan after filing Chapter 7, especially if the bankruptcy was recent,” Griffin says. Whether you qualify will likely depend on several factors, such as:

— How long ago you filed for bankruptcy.

— Whether you have established a positive account history since your bankruptcy.

— The type of loan you are applying for.

“If you qualify, you will almost certainly have to pay higher interest rates and other fees, especially if your bankruptcy was recent,” says Griffin.

For example, if your credit score is still fair or very poor — which is considered under 670 on FICO — expect to pay a higher interest rate than someone with a higher score.

Here is a look at ways to get approved for common loans:

Unsecured loans: Credit cards and personal loans are types of unsecured loans. Soon after bankruptcy, you’re more likely to qualify for credit cards with high interest rates and low maximum balances (up to about $2,000) than for something like a $10,000 personal loan, van Rijn says.

Mortgages: It will likely take a few years to get your credit score high enough to be considered for a conventional mortgage with a reasonable interest rate.

The easiest way to qualify is likely with a government-backed loan with lower requirements for credit scores.

If you file Chapter 7 bankruptcy, you’ll wait at least two years after your loan discharge before you can apply for loans from the Federal Housing Administration or Department of Veterans Affairs. However, if you file for Chapter 13, your waiting period could be just one year after the start of your bankruptcy payout period for FHA and a year from your Chapter 13 filing date for VA.

Other types of mortgages you might qualify for may be less appealing, with high interest rates and balloon payments.

[Read: Best FHA Loans.]

“It may take some time before you can qualify for a mortgage or other large loan with a lower interest rate and more favorable terms, but try not to get discouraged,” Griffin says. “As long as you practice good spending and payment habits as you rebuild, in time your credit scores will begin to reflect that.

Beware Loan and Credit Scams

When you’ve been struggling for years to bring up your credit score, you may be tempted to look for shortcuts. But that’s exactly what unscrupulous companies are looking for when they trick you with loan and credit-building scams.

For example:

— Advance fee loans, in which you are guaranteed approval if you provide $100 or more, might be illegal. The Federal Trade Commission prevents anyone who guarantees that you will obtain a loan from asking for payment beforehand. Legitimate lenders will ask that you go through a loan approval process but will not guarantee acceptance upfront.

— Credit repair companies might make promises they can’t keep — such as removing accurate negative information from your credit report — and ask for upfront money. Know that you can take most credit improvement steps on your own, for free.

While recovering from bankruptcy, you may need to make major changes in how you spend and deal with debt while also planning for the future. It might be difficult to balance your post-bankruptcy recovery with a loan until you’re truly ready to handle that responsibility.

“Keep in mind, the point of bankruptcy is to reset your personal finances,” Griffin says. “If you are in a rush to take on more debt, you’ve missed the point.”

More from U.S. News

Complete Timeline of the Mortgage Process

Is a Portfolio Mortgage Right for You?

How to Spot a Mortgage That’ll Set You Up for Failure

Can You Get a Loan After Bankruptcy? originally appeared on

Source link

Continue Reading


Are Sallie Mae Student Loans Federal or Private?



When you hear the name Sallie Mae, you probably think of student loans. There’s a good reason for that; Sallie Mae has a long history, during which time it has provided both federal and private student loans.

However, as of 2014, all of Sallie Mae’s student loans are private, and its federal loans have been sold to another servicer. Here’s what to know if you have a Sallie Mae loan or are considering taking one out.

What is Sallie Mae?

Sallie Mae is a company that currently offers private student loans. But it has taken a few forms over the years.

In 1972, Congress first created the Student Loan Marketing Association (SLMA) as a private, for-profit corporation. Congress gave SLMA, commonly called “Sallie Mae,” the status of a government-sponsored enterprise (GSE) to support the company in its mission to provide stability and liquidity to the student loan market as a warehouse for student loans.

However, in 2004, the structure and purpose of the company began to change. SLMA dissolved in late December of that year, and the SLM Corporation, or “Sallie Mae,” was formed in its place as a fully private-sector company without GSE status.

In 2014, the company underwent another big adjustment when Sallie Mae split to form Navient and Sallie Mae. Navient is a federal student loan servicer that manages existing student loan accounts. Meanwhile, Sallie Mae continues to offer private student loans and other financial products to consumers. If you took out a student loan with Sallie Mae prior to 2014, there’s a chance that it was a federal student loan under the now-defunct Federal Family Education Loan Program (FFELP).

At present, Sallie Mae owns 1.4 percent of student loans in the United States. In addition to private student loans, the bank also offers credit cards, personal loans and savings accounts to its customers, many of whom are college students.

What is the difference between private and federal student loans?

When you’re seeking financing to pay for college, you’ll have a big choice to make: federal versus private student loans. Both types of loans offer some benefits and drawbacks.

Federal student loans are educational loans that come from the U.S. government. Under the William D. Ford Federal Direct Loan Program, there are four types of federal student loans available to qualified borrowers.

With federal student loans, you typically do not need a co-signer or even a credit check. The loans also come with numerous benefits, such as the ability to adjust your repayment plan based on your income. You may also be able to pause payments with a forbearance or deferment and perhaps even qualify for some level of student loan forgiveness.

On the negative side, most federal student loans feature borrowing limits, so you might need to find supplemental funding or scholarships if your educational costs exceed federal loan maximums.

Private student loans are educational loans you can access from private lenders, such as banks, credit unions and online lenders. On the plus side, private student loans often feature higher loan amounts than you can access through federal funding. And if you or your co-signer has excellent credit, you may be able to secure a competitive interest rate as well.

As for drawbacks, private student loans don’t offer the valuable benefits that federal student borrowers can enjoy. You may also face higher interest rates or have a harder time qualifying for financing if you have bad credit.

Are Sallie Mae loans better than federal student loans?

In general, federal loans are the best first choice for student borrowers. Federal student loans offer numerous benefits that private loans do not. You’ll generally want to complete the Free Application for Federal Student Aid (FAFSA) and review federal funding options before applying for any type of private student loan — Sallie Mae loans included.

However, private student loans, like those offered by Sallie Mae, do have their place. In some cases, federal student aid, grants, scholarships, work-study programs and savings might not be enough to cover educational expenses. In these situations, private student loans may provide you with another way to pay for college.

If you do need to take out private student loans, Sallie Mae is a lender worth considering. It offers loans for a variety of needs, including undergrad, MBA school, medical school, dental school and law school. Its loans also feature 100 percent coverage, so you can find funding for all of your certified school expenses.

With that said, it’s always best to compare a few lenders before committing. All lenders evaluate income and credit score differently, so it’s possible that another lender could give you lower interest rates or more favorable terms.

The bottom line

Sallie Mae may be a good choice if you’re in the market for private student loans and other financial products. Just be sure to do your research upfront, as you should before you take out any form of financing. Comparing multiple offers always gives you the best chance of saving money.

Learn more:

Source link

Continue Reading


Tips to do some fall cleaning on your finances



Wealth manager, Harry Abrahamsen, has five simple ways to stay on top of the big financial picture.

PORTLAND, Maine — Keeping track of our financial stability is something we can all do, whether we have IRAs or 401ks or just a checking account. Harry J. Abrahamsen is the Founder of Abrahamsen Financial Group. He works with clients to create and grow their own wealth. Abrahamsen shares five financial tips, starting with knowing what you have. 

1. Analyze Your Finances Quarterly or Biannually

You want to make sure that your long-term strategy is congruent with your short-term strategy. If the short-term is not working out, you may need to adjust what you are doing to make sure your outcome produces the desired results you are looking to accomplish. It is just like setting sail on a voyage across the Atlantic Ocean. You know where you want to go and plot your course, but there are many factors that need to be considered to actually get you across and across safely. Your finances behave the exact same way. Check your current situation and make sure you are taking into consideration all of the various wealth-eroding factors that can take you completely off course.

With interest rates very low, now might be a good time to consider refinancing student loans or mortgages, or consolidating credit card debt. However, do so only if you need to or if you can create a positive cash flow. To ensure that you are saving the most by doing so, you must look at current payments, excluding taxes and insurance costs. This way you can do an apples-to-apples comparison.

The most important things to look for when reviewing your credit report is accuracy. Make sure the reporting agencies are reporting things actuary. If it doesn’t appear to be reporting correct and accurate information, you should consult with a reputable credit repair company to help you fix the incorrect information.

4. Savings and Retirement Accounts

The most important thing to consider when reviewing your savings and retirement accounts is to make sure the strategies match your short-term and long-term investment objectives. All too often people end up making decisions one at a time, at different times in their lives, with different people, under different circumstances. Having a sound strategy in place will allow you to view your finances with a macro-economic lens vs a micro-economic view. Stay the course and adjust accordingly from a risk and tax standpoint.

RELATED: Financial lessons learned through the pandemic

A great tip for lowering utility bills or car insurance premiums: Simply ask! There may be things you are not aware of that could save you hundreds of dollars every month. You just need to call all of the companies that you do business with to find out about cost-cutting strategies. 

RELATED: Overcome your fear of finances

To learn more about Abrahamsen Financial, click here

Source link

Continue Reading


How to Get a Loan Even with Bad Credit



Sana pwedeng mabura ang bad credit history as quickly and easily as paying off your utility bills, ‘no? Unfortunately, it takes time. And bago mo pa maayos ang bad credit mo, more often than not, kailangan mo na namang mag-avail ng panibagong loan. 

Good thing you can still get a loan even with bad credit, kahit na medyo limited ang options. How do you get a loan if you have bad credit? Alamin sa short guide na ito. 

For more finance tips, visit Moneymax.



Source link

Continue Reading