It is well known that bankruptcy has a very negative effect on your credit rating, and can make obtaining credit very difficult for around eighteen months to two years following your bankruptcy discharge date. However, equity home loans can not only be a source of credit, but can also help improve your credit rating on the way.
Providing a year has passed since your bankruptcy discharge, and you have been in employment at the same company for two or more years, then you stand a good chance of being approved for an equity home loan. These are loans that are secured on any value of your home that is greater than your mortgage amount, which is known as equity. The simple fact that the loan is secured on your home means that lenders are willing to lend you larger amounts of money, as they have your home as security should you default on the loan. This is something that need serious consideration before you take out a loan secured on your home as you risk losing everything if you find you cannot keep up with your repayments.
The fact that you are using your property as collateral means that your loan is likely to have lower interest rates than an unsecured loan, and this does make a secured loan a much more attractive option in the long run. You may have found yourself unable to obtain a credit card or other similar credit, but this does not mean that an equity loan application will also be rejected. Credit card and other unsecured credit applications are judged using different criteria than secured credit applications, as the risk is much higher with them. By getting a loan secured on your home you also have the opportunity to begin repairing your credit rating and making yourself a more attractive prospect to lenders in the future. Having a good record of making regular loan payments on your credit report will help boost your credit rating, and the longer you continue making regular payments, the better your rating will get. When coming out of the other side of bankruptcy, this is really important to help you get your financial status back on track.
Following bankruptcy, patience is the key when applying for credit. It may take a while to find a lender who is willing to accept an application from you, but by looking carefully and making sensible choices you will be much better off in the long run. By doing plenty of research and comparing lenders you will be able to find the most competitive deal being offered, which when taking out what is seen as high-risk credit, is important. Tying yourself into a long term, high interest loan is the opposite of what you are trying to achieve, so taking the first thing that comes along is not the way to go about securing yourself a good loan.
