Bankruptcy will damage your credit report and could make it very difficult to borrow money again. When it comes to payday loans online or anywhere else, it is important to remember that they are a form of short term credit and so their APR and charges will be higher. For people looking to take out a payday loan having been bankrupt in the past, payday lenders can still consider you for credit, but it may be the case that the APR and the loan charges involved are higher.
In this guide, we’ll run through everything you need to know about bankruptcy and whether that means you can take out a payday loan.
What is bankruptcy?
Bankruptcy is a legal process in which an individual petitions the courts to free them from responsibility for their debts. The laws were put in place to give people a chance to start over when their finances collapse. In most cases, the request is granted by the federal bankruptcy court. Bankruptcy can be a legal lifeline and saving grace for people who are drowning in debt and can’t see a way out.
However, bankruptcy can have a severe and long-term effect on your credit rating. Bankruptcy remains on your credit report for around 7 to 10 years. It is likely to affect your eligibility to take out credit cards and get approved for future loans.
Can I get a loan after bankruptcy?
When bankruptcy information is visible on your credit report, getting approved for financial products can be challenging. Lenders will be wary about giving you credit and may demand even higher interest rates.
Payday lending companies are known for offering loans to people with bad credit histories. You may find that a payday loan is one of your only options for credit. However, it would be best if you remained mindful not to fall back into any bad habits that led to your bankruptcy. It may have been payday loans that contributed to your debt problems in the first place.
You should consider all the alternatives to payday loans if you have already filed for bankruptcy and need more money.
Am I eligible for a payday loan after bankruptcy?
Payday loans are appreciated for being widely available to those with poor credit histories. However, you will still need to meet eligibility requirements in order to be approved. To be eligible for a payday loan in the US, you must meet four requirements.
- Be a US citizen
- Be over the age of 18
- Have a regular income of at least $800 a month
- Have an active checking account
- Live in a state that allows payday loans (i.e. California, Iowa, Kentucky and more)
While you need to have a regular form of income of at least $800 per month to borrow money in the form of get a payday loan, this doesn’t have to be a salary. If you are unemployed, on benefits or have another steady income source, lenders will still consider your loan application. Even if you have declared bankruptcy, a lender will decide whether to approve your loan based on whether your income is sufficient to afford the repayments.
Should I get a payday loan after bankruptcy?
It will be essential to begin rebuilding your credit as soon as possible after bankruptcy. You will need to ensure that you pay all your bills on time. Getting a credit product could actually help you improve your credit score, so long as you are strict in meeting your repayments by their deadlines.
It also depends on your employment status, if you are unemployed and looking for a loan it may be harder to get a payday loan once you have filed for bankruptcy. However, payday loans in particular, can be tricky, with high-interest rates known for pushing customers into a cycle of debt. Remember to be cautious not to return to the behaviours that led to your bankruptcy. Payday loans come with dangers that can contribute to debt problems.
Can I file for bankruptcy on outstanding loans?
Yes, you can file for bankruptcy on your loan debt. But, if you are unable to repay your loan, bankruptcy should not be your first step.
Claiming bankruptcy should always be discussed with a professional to determine if it is the appropriate action for your circumstances. It is advisable to ask for guidance from a nonprofit credit counsellor, legal aid centre or bankruptcy attorney about your options.
Remember, bankruptcy will damage your credit report and could make it very difficult to borrow money again!
If you are unable to meet your loan repayments, you should talk to your lender to find a solution. Contacting the lending company to find a manageable repayment plan should be your first port of call. Lenders may be able to renegotiate your repayments so that you can pay off smaller amounts over a more extended period. 90% of the time, your lender will be able to figure out a more suited payment schedule that allows you to repay your loan without having to file for bankruptcy.