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Using Credit Wisely After Bankruptcy

“Disguised” Reaffirmation Agreement

You may receive offers from companies that appear to be lenders that you included in your bankruptcy. Often debt collectors use this tactic to bait you into debt reaffirmation. Thoroughly read the fine print for offers to get new credit. The problem is where they say your new account balance will include some if not all of your discharged debt.

“Secured” Credit Card

New bankruptcy filers can also be targeted with a “secured” credit card marketing scheme. A single bank deposit secures the balances of these cards. The limit on the card is however much you put in. The account is subsequently depleted if you can’t come up with the money for the payments. If you can regularly make payments each month they can be a good way to prove you have become fiscally responsible. Creditors do not, however, have any reason to trust they can use your deposits as collateral since almost anyone can get a “secured” credit card despite their history. Also, restraining your account is not recommended.

Credit Repair Companies

Keep your eyes open for companies that say they can erase your bad credit. As expensive as these services are, they are a waste of money as they are often scams. It is a fact that bad credit simply cannot be erased as long as it is legitimate. You can, however, fix outdated or false information for free.

Avoid High Cost Predatory Lenders

Filing for bankruptcy doesn’t mean you have to accept the worst credit terms. You always have the option of waiting a little while after you file so your terms improve. Over time, if you can prove that you have become fiscally responsible, many lenders won’t let your bankruptcy hinder your future financial actions.

Often lenders, auto companies, and even mortgage brokers will tell you that having bad credit won’t affect your doing business with them. Their intention is to outrageously up charge you on the loan. They purposefully make it text to preposterous to think that you can reasonably continue to make the payments. Any possibility that you could rebuild your credit immediately becomes unrealistic.

Mortgage Loans

Owning a home leaves you liable to receive offers from contractors, brokers, and lenders interested in giving you a loan regardless of your past financial situation. Unfortunately the cost and ultimate problems that arise from these loans can result in you losing your home. Decline or even dodge mortgage lenders that do the following:

– Nail you with fees, termination charges, and excessive interest rates.

– Make you reconfigure your mortgage or catch up on debts.

– Include insurance or other needless products.

– Claim to charge you with minimal monthly payments or different initial interest rates.

– Make you fork up a lump sum to pay for a generous amount of your loan. This is termed as a “balloon” payment.

– Penalize you for paying the bar before you are supposed to.

– Alter terms upon closing.

– Promise a reduction in rates if your payments are on time.

– Continuously ask you to refinance.

Small Loans

Saving money to pay for unforeseen charges is always a good idea so you keep from having to borrow money. If your finances truly require a loan, stay away from these expensive loans:

Payday loans

You may be contacted by a paycheck advance company who will offer to hold your check for a few weeks. In lieu of your check, you receive a sum less than your original check. At the end of the holding period, you collect your check amount, less the interest they charge. This process ends up being considerably pricey. For instance, if you get $200 on a $256 paycheck, that $56 they keep comes out to be a 728 percent interest charge. If you for some reason cannot pay back the loan, they company may attempt to get more money out of you, or even sue you. Writing another check simply creates more debt and you are worse of than you started.

Auto title loans

Similar to pawnshops, lenders can exchange your property for loans with high interest rates. Title lenders have adopted this method through trading your car title as collateral for a loan with interest rates that can go up to 800 percent. Not making payments on time can result in repossession and possibly the selling of your vehicle.


A rent-to-own company can charge you up to four times the amount it costs to purchase an appliance on the spot. Previous customers may have even used the item you paid for, leaving the company with all the more benefit. Then, they can turn around and take the item back if you fail to make a payment and you end up with no gained credit for your previous payments.

Tax refund anticipation loans

Tax preparation companies sometimes offer an on-the-spot tax refund through giving loans by projected refund amounts. The time period for the loan is the short space between when you are supposed to get your refund and when you file your return. Interest rates can go far beyond 200 percent. Recommendations are to have patience while your refund is being processed.

What You Can Do to Avoid Problems

Don’t buy in. If you question or have any doubt in your mind that the service is going to be affordable or if you even need it, don’t get it. Salespeople will try to talk you in to it either way and any way they can. Luckily, you can change your mind at anytime, even right before you sign the dotted line.

Use comparative shopping. Just because you qualify to get a lone from a bank with normal rates doesn’t mean you have to settle. They are relying on your to believe this is the best you can do. Letting go of any shame or embarrassment about your situation will help you to have courage to shop around and get the best terms possible.

Analyze the terms. Monthly payment amounts should be just a small influence in your decision. Also look at the percent of the annual rate since this number includes other dues that come along with the loan. Inform yourself of all the fees you are being charged, and more importantly, why.

Ask a professional. Before you sign, read all of the paperwork carefully. If you have any questions at all, don’t hesitate to contact a professional for help. If for some reason the lender does not permit outside help, they are not to be trusted.

Know your rights. When it comes to refinancing mortgages, you legally have up to three days to cancel from the time you sign. Use this right to your benefit if for any reason you think you may have gotten a bad deal. Go with your gut feeling despite the lender attempting to keep you from canceling.

Start sooner than later. Once you realize you are having financial problems and you’re wondering how to manage your debts, ask a debt agency for help.

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