Bad Credit Loan or Bankruptcy?

October 29, 2011 by  Filed under: Bankruptcy 

If you’ve got bad credit or are recovering from a poor credit history, it can seem almost impossible to secure a loan. Bad credit seems like a black mark that you can’t escape; banks won’t lend to you unless your credit rating improves, but you can’t improve your credit rating unless a lender gives you the opportunity to do so.

It’s this kind of financial pickle that makes these types of loans seem more attractive than ever. Bad credit loans are exactly that – loans for people with bad credit. With this kind of view about these loans (and given the negative stereotypes surrounding bankruptcy) it’s no wonder more consumers think it is better to apply for bad credit loans rather than bankruptcy.

However, if you’re tempted to take out that loan, you might want to hold off on signing that bottom line – and make an appointment with a bankruptcy lawyer instead.

It’s true, bad credit loans are often the only types of loans that are available to those suffering from a poor credit rating; yet the implications of taking out the loan can leave your credit score even weaker than before. Credit reporting agencies tend to look at these types of loans with a discriminating eye, since most companies who offer these types of loans are considered “high risk”.

If you apply for a credit card or another loan down the line, your bank or lender will see that you’ve been so financially hard-up that you had to resort to using one of these “high risk” companies. This will make them believe that you don’t have control of your finances, which may lead to rejection of your loan application. Factor this in to the sky-high interest rates and hidden fees, and a loan may seem to be more trouble than it’s worth.

If you’ve thought about taking out a bad credit loan, consider the alternative of applying for bankruptcy. If you’re at the financial point where you’re considering applying for these types of loans, then your credit rating is already at an all-time low – and applying for bankruptcy won’t do that much damage. Plus, bankruptcy eliminates all of your unsecured debt – whereas bad credit loans just get you caught up in a cycle of even more debt.

Getting a loan with poor credit is possible but if you want to break that impossible debt cycle, it may be time to consider filing for bankruptcy.

Reed Allmand, sponsoring attorney for Bankruptcy.net, is constantly looking for ways to provide the best financial information for his clients. Whether you are considering filing for bankruptcy, or are currently going through a Chapter 7 or Chapter 13, visit http://www.bankruptcy.net for up to date news and information you need to know.

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