Bankruptcy Unsecured Loans

An unsecured loan is anything that refers to the type of debt or loan that has been obliged without collateralisation of assets. The lack of collateral security makes the creditor and the loan unsecure. Examples of such loans include personal loan either from a small lender or a friend or relative, credit card bills and medical bills. Personal loans are also known as signature loans where the loan is taken with just a signature on an agreement stating that you would repay the loan.

Though you will still be liable to repay loan not included in your bankruptcy order, sometimes it is mandatory to go in for loans. Bankruptcy affects your borrowing capacity and your credit rating to a very bad extend and this makes it exceedingly difficult to takes loan after a period of bankruptcy. This is where unsecured loans play their part as there are lenders and banks that provide unsecured loans for bankrupt individuals. The loans that are provided to bankrupt individuals can range from a minimum of £1000 to a maximum of £25000. The amount you would be eligible for depends greatly on the monthly income and the repayments contributed to the other debts.

Unsecured loan after bankruptcy can be a huge relief to solve debts that are still pending after your bankruptcy, but be careful as a second bankruptcy would make matters worse and extend your bankruptcy terms for almost about 5 years. Before you apply for your unsecured loan, consider on the points below to ensure that you make the best out of them.

Tip#1: Shop around for before you fix on one
The first point for consideration would be where to apply for the loan. There are many companies and banks that provide unsecured loans for bankrupt individuals, but at a higher interest rate. Thus it is advisable that you perform a thorough analysis of the different loan rates offered so that you can settle for a comparatively better rate. Remember that the high rate of interest increases your monthly repayment and though not initially, this might become an overhead down the years. You can look around in online sites for vendors who offer least interest rates for the loan amount you require.

Tip#2: Plan your repayment per month and fix the loan amount based on it.
You income after bankruptcy and your monthly commitments needs to be considered when you decide on the amount of unsecured loan you plan to apply. The unsecured loan is offered at high rate of interests and this tends to increase you monthly burden. The higher the loan amount, the more the repayment amount will increase. So before you apply for your loan, fix your budget, calculate your monthly income and expense and then decide on the amount that you afford to repay on a monthly basis.

Tip#3: Make regular payments as it will help increase your credit levels.
One important advantage with unsecured loans is that with regular payments, these loans will increase your credit ratings and will give it a huge push towards the higher end. So make sure that you make regular prompt payments for these loans as a kick start to increase your credit levels. Regular payment of credit card bills, medical bills, etc. tends to increase your credit history which would have been shattered by your bankruptcy. Thus it is a must that you borrow on a safe amount that you can repay and ensure that you make your payments on a timely basis.

In cases of bankruptcy, unsecured creditors are paid after the claim of secured borrowers have been made and also possess risk of not being to claim the entire loan amount. The creditors associated with these unsecured loans like the credit card companies provide loan based on the terms and conditions accepted during the card purchase. These creditors can add additional charges for non-repayment or initiate legal proceeding against the borrower but cannot demand for his money by selling off the borrower’s assets. This risk that these loans create is one reason why the lender demand higher rate of interest compared to the secured loans.

The unsecured loans that are offered to bankrupt people is an effective way to close loans and debts that are out of your bankruptcy order like court fines, student loan, etc. and by choosing the right amount and making regular payments, these are great ways to increase your credit ratings and head towards the new start.

Post a comment