Getting loans after bankruptcy is the result of rebuilding your credit, therefore rebuilding your trust with creditors. The first thing you need to do is save your money. You may be thinking that every penny is being allocated now so saving money is impossible. Through the development of a plan that includes a budget and ways to save money through making changes to your traditional spending, you’d be surprised at how much you could save…and how quickly you could save it! More on this later.
Once you save some cash, you can purchase a pre-paid (secured) credit card. All this means is that you take, say, $500 from your savings and deposit it into a pre-paid credit card account. You can then use this $500 as credit. It is pre-paid credit. This is not to spend frivolously!!! It is to pay your normal bills, such as gas for your car and groceries. You continue to save another $500 while you are using the card, and when the money has been depleted, inject another $500.
While you are doing this, you need to establish a relationship with the bank manager at your local bank or credit union. Be up front and let them know what you are doing. They will be happy to help you with the process as it will develop loyalty in their eyes. And it should.
Once this relationship has been established, ask to put your money in a CD for a year and take out a loan using the CD as collateral. Put the money from the loan in a separate account checking account all by itself and set up automatic payments from that account towards your loan.
You will pay interest out of your own pocket, but it’s a small amount that will go a long way towards building your credit. For example, you save $500 and put it in a CD for 1 year at the bank where you established a relationship with the manager. The CD earns 2% for a one year CD (current rates are very low, and this is just an arbitrary, easy number). At the end of the year your $500 is now worth $510.
You take out a loan for $500 at 10% for one year using the CD as collateral. (Interest rates are currently very low also, but you will pay more because of the bankruptcy. This 10% is an arbitrary, easy number to work with). Your loan payment for $500 at 10% for 12 months will be approximately $44/month. You deposit the $500 personal loan into a separate checking account and set up automatic payments of $44/month. At the end of the 12 months the loan will be paid and your credit report updated. You have just made your credit stronger and improved your score.
As for the money, your CD would now be worth $510 and your loan would have cost $544, so you have only paid $34 to strengthen your credit, improve your score, and build your relationship with your bank. So what do you do now? Do it again! (Also, if you don’t want to spend the $34, take out a loan for less than $500 so that the loan with interest will equal less than $510 after 12 months.)
There are many other methods that can be used to re-establish your credit worthiness. Too many to list here, but stay tuned for more information. I could write a book on ways to improve your credit.