Introduction to Loan Options
For Bad Credit Borrowers

presented by Mory Brenner, Esq.



        A myth pervades our society that individuals who have filed chapter 7 bankruptcy, chapter 13 bankruptcy, failed to stop foreclosure or developed bad credit from credit card debt will never again obtain a credit card, car loan or home mortgage. Perhaps this myth grew out of truths in prior decades about bad credit or perhaps it continues to exist through inaccurate threats made by unscrupulous credit collectors. The truth: even with the worst credit, even one day after bankruptcy, an individual with bad credit may still obtain a credit card, a car loan or a home mortgage loan.


        People with bad credit must understand, however, that while the doors to the world of credit are not closed to them they will open to a different place compared to individuals with good credit. One's experience in the world of bad credit will vary based on the degree of their problems and during times of credit tightening offers for people with bad credit may be further reduced. Some issues effect all bad credit borrowers but vary in severity. Interest rates will be higher. While some may be surprised or offended by this the concept is understandable. A rate of interest is computed by taking into consideration the general rate of interest nationwide at the time the loan is made and the specific risk of the particular loan in question. Commonly the prevailing rate of interest in the US is expressed as the prime rate, which is the rate of interest a bank may charge its very, very best customers. Competition results in the prime rate at most banks being the same or within a half a point or less. The current prime rate can be found in any financial publication such as the Wall Street Journal or on the Internet. Other base rates which you may hear used include LIBOR (London Interbank Offered Rate) or a specific treasury bill issued which basically represents a bond for specific term of years issued by the U.S. government. These other rates usually dictate mortgage rates while the prime controls most credit cards and car loans.

        The next element of credit appears as an addition to this rate, for example prime plus 1% or LIBOR plus 10%. Before even taking one's credit into account these add ons will first be gauged on the type of debt. For example a home equity loan where the creditor receives a security interest in a debtor's primary residence, may bring with it little or no special additional risk. Lenders consider your house the collateral which you most vigilantly protect and thus the debt mostly likely to be paid by a debtor. At the other extreme an unsecured personal loan may bring with it a risk factor causing a lender to increase the underlying rate to prime plus 6% or more. With this in mind we now add the element of bad credit. Interest rates for those with a previous history of bill paying problems will be higher than those with perfect records. Put yourself in the Bank's shoes for a moment and imagine how you would react if two borrowers came into your office, one following the other, for the same loan.

One borrower has a long and perfect credit record and the other brings a history of failure to pay bills and even bankruptcy. You clearly would be much more comfortable making the loan to the individual with perfect credit. To make a loan to the individual with bad credit you would want some sort of incentive to put your money at risk; that incentive comes in the form of higher interest rates. Certain high risk loans may not be available to those with severally damaged credit. Creditors at some point do draw a line at the risk they are willing to take and because usury laws restrict the amount of interest that can be legally charged. Loans in this group include unsecured personal loans and many credit cards.

Lenders may offset the risk by simply lending less money compared to the collateral. In the case of a mortgage or home loan that means requiring a larger down payment in order to make the loan in the first place. With car financing you might see less time offered to repay the loan. Combine shorter amortization periods with higher interest rates and you get some very large payments. In some cases number grow so large the difference between good credit terms and bad credit terms means the proposed loan becomes unaffordable for the bad credit borrower.

        While this picture may be depressing keep in mind that a bankruptcy or negotiated settlement actually improves ones credit compared to ignoring debt. The combination of rebuilding your credit and time will eventually bring you back to the world of good credit. In the meantime, plentiful credit and loan options remain available to those with bad credit in the areas of home mortgages, auto loans and credit cards. Armed with the knowledge of how these loans work they can serve you well until you restore your good credit. You should think about learning more about how a credit score works and exactly what your credit score is because once you understand what is bad credit you may discover your credit is really not too bad at all.



For more information on borrowing money with bad credit visit:
Click here for information and guidance on obtaining a home loan despite having damaged credit, history of bankruptcy, or other unusual loan issues. Click here for information and guidance on credit card companies who lend to people with bad credit. Click here for information and guidance on obtaining a car loan despite having damaged credit, history of bankruptcy, or other unusual loan issues. Click here to begin your introduction to personal loans for borrowers with bad credit.

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Lifestyle | Real Property and Other Hard Assets | Foreclosure | Cash, Stocks, IRAs and Other Soft Assets | Secured vs. Unsecured Creditors | Credit Rating
Debt Workout Mortgages & Secured Debt | Credit Card & Unsecured Debt | Bankruptcy | Do Nothing | Deed in Lieu of Foreclosure | Do Nothing Home Forclosure | Pay Creditors in Full | Debt Consolidation Loan | Non-Profit Credit Counseling | Credit Card Balance Transfer

Debt Consolidation / Debt Settlement Program - Consolidate your credit card and unsecured personal debt with a program to settle balances for 30-50 cents on the dollar. Make monthly payments toward the total settlement over a period of years. Free initial consultation. Learn more and see if your situation fits the program online.

A Guide to Borrowing Money with Bad Credit - Including informational articles on obtaining a home mortgage, auto loan, credit card or unsecured personal loan.

Credit Cards For People With Bad Credit - Read either informational articles on obtaining any type of bank card or credit card with bad credit, including a definition of what is bad credit or look at a complete set of FAQs dealing secured credit cards.

Credit Repair and Credit Rebuilding -Credit repair and credit rebuilding article. Topics include how to repair your credit and warnings about credit repair scams. Links to other credit repair sites and professional credit repair services plus my own Free Guide to Help Repair and Rebuild your Credit Report. For more credit help try 14 Do's and Don'ts To Raise A Score Fast or the Credit Score FAQ.

Who to pay when you can't pay everyone - An article addressing cash allocation for debtors.

How to Get money when you need money - Examines WHEN you really NEED money and how to get money even with bad credit for an emegency or financial crisis.

Stop Home Foreclosure Help - Articles to better understand the foreclsoure process and how to avoid a foreclosure including an interactive tool to analyze your own situation and point you in the right direction to keep your home, a list of various ways to halt a foreclosure, a list of 10 mistakes to avoid when facing foreclosure and foreclosure myths.

Personal Home Budget Analysis - An interactive tool to learn where your money REALLY goes. Input your income and expenses, the program will automatically determine if you have accounted for all you have spent. When you have discovered all your expenses you will be know the details of any overspending. Use this information to help plan and keep a monthly budget or change spending to avoid further debt or bankruptcy.

Credit Card Debt - Online guidance to understand your debt and consumer spending habits in order to evaluate the credit card debt solutions and pick best debt relief for you. See 10 common causes of bankruptcy so you can avoid them.

Bankruptcy Questions - Find all the bankruptcy information you might be looking for about both chapter 7 bankruptcy and chapter 13 bankruptcy including chapter 7 vs chapter 13, what does a chapter 13 do, who should file a chapter 13, what happens after chapter 13 bankruptcy dismissal, how to find a bankruptcy attorney, hiring and working with your bankruptcy attorney, chapter 13 payment calculator, and much more.

For information on contacting Mory Brenner, Esq. please visit the contact page.

Nothing contained herein should be construed to constitute advice for your personal circumstances. This is intended as a peripheral exposure to the various options available, but by no means is this a comprehensive or exhaustive analysis of the bankruptcy laws or their alternatives. Whether or not you should file a Chapter 7 bankruptcy, Chapter 13 bankruptcy, or any bankruptcy, will vary depending on your personal circumstances and should only be undertaken after careful consideration, analysis and after consultation with an attorney experienced with such matters. These pages may contain information and rules peculiar to the Commonwealth of Massachusetts.

This material may be considered advertising under the rules of the Supreme Judicial Court of Massachusetts.

Web site design by Mory Brenner. This page, and all contents, are Copyright (C) 2011 by

Financial Firebird Corporation, 150 North Street Suite 40, Pittsfield, Massachusetts 01201.

The most recent update of this page occurred on 1/29/11.


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