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Get Out of Bankruptcy using Your Home Equity

June 13, 2020   Loan Tips

Filing for bankruptcy will not always discharge your from all your debts. Now that the New Bankruptcy Law has taken effect, filing for bankruptcy is ever more difficult and complicated. Today, your bankruptcy attorney cannot advice you about which type of bankruptcy you should file. Even if you want to acquire a Chapter 7 bankruptcy and be released from all your debts, it will not be so easy.

Under the new bankruptcy law, the bankruptcy court judge will be the one to decide whether you can file for a Chapter 7 Bankruptcy and get discharged from your debts. First you have to go through a “means test” which calculates your income, your monthly expenses and your financial capability as a borrower. If you passed the test, that’s the only time you can file for a Chapter 7 Bankruptcy. If you fail, the judge will require you to file for a Chapter 13 bankruptcy.

Getting Out Through Home Equity
A Chapter 13 bankruptcy will put you in a repayment plan, which means you still have to pay off your debts. However, through bankruptcy, your debts will be reduced and your creditors will be giving you a much lower interest. Under the bankruptcy provision, creditors can only impose up to 10% of interest rate to their debtors. Furthermore, the New Bankruptcy Law has made all repayment plans to be a mandatory five-year term. This gives you a better chance at getting out of your debts more easily.

If you filed for a Chapter 13 Bankruptcy, there is a way to make things even better for you. By using your home equity to repay your outstanding debts, you have the option to pay off your debts either in part or full payment. Acquiring for a home equity loan will also give you more time to pay off your debts. Inquire from your attorney about this option so that he can personally make the necessary preparations if you do decide to get a home equity loan. It is also interesting to note that a mortgage loan is a great way to rebuild your credit.

No Need to File for Bankruptcy
It is also worth asking if there really is a need for you to file for bankruptcy. Given the fact that the New Bankruptcy Reform Act has made the procedures more strict and more complicated, you might want to consider other options rather than filing for bankruptcy.

Since the Bankruptcy Law will require you to undergo credit counseling with an accredited agency six months before filing, the credit counseling agency can help you find a more appropriate solution to your debt problem. Here is where a home equity loan again comes as an option.

A home equity loan lets you borrow the money you need based upon the value of your home property. By paying your creditors with your home equity, you don’t even have to file for bankruptcy. Again, it will give you more time to make repayments and it will save your credit report from the record of bankruptcy.

However, before you do apply for a home equity loan, find a lending company who will be willing to give you better rates. Keep in mind that a home equity loan uses your home as a security so be aware about your payment obligations.

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Secured Loans Are Based On Equity In Your Home

May 7, 2020   Auto Loans

In financial jargon, the word Equity means the difference between the market value of your home and the debts raised against it. In other words, it is the unencumbered value of your home that is known as equity. The concept of equity is important for a homeowner since a loan can be raised against the equity in your home. Many lenders offer a loan to value ratio of eighty per cent only. It means that if your home has a value of £150,000, you can take a loan up to £120,000.

The credit rating that you have at the time of taking loan is very important. A good credit rating implies that your past conduct in the financial transactions was trustworthy and, therefore, lenders are likely to offer you a low rate of interest. By releasing the equity in your home, you can borrow up to £250,000. People usually take loan against equity only when they have large monetary requirements.

How borrowers are advantageously placed when taking secured loans?

In the past few years, the value of an average home in the UK has increased manifold. This reflects in the prevailing home prices; an average home costing more than £200,000 in the UK. The higher the price, the higher will be the equity in your home. Thus, the homeowners who want to borrow money are obviously better situated than those who are living on rent. In normal course, lenders give 80 per cent of equity in your home as a loan but this is not a fixed criterion and you may get more or less depending upon individual financial circumstances.

Bad credit loans and credit reference agencies

Secured loans are also available to those people who are having a bad credit rating. The credit rating is a numerical figure that is attributed to every borrower on the basis of his past conduct in the loan market. There are several credit reference agencies in the UK that gather information from various sources like the electoral roll, county court judgments and financial institutions. On the basis of the information collected, these agencies give a credit rating to every borrower. Lenders check credit rating to their satisfaction before sanctioning any loan to the borrowers.

Bad credit loans are available in two ways – by providing a security or without it. However, lenders prefer to give bad credit loans only to those borrowers who can provide a security. This is usually done to cover the risk involved in giving loans to people who have dubious credit record.

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