Can you get a payday loan after bankruptcy?

Posted on Thursday, August 6th, 2009 at 8:05 pm in Helpful Payday Loan Info, Miscellaneous Cash Loan Info

When you file for bankruptcy, one of the things that happens is that your credit score takes a tumble and a note gets attached to your credit report. This note, which can’t be removed for the next 10 years, describes the fact that you’re now bankrupt. Every time a potential lender checks your credit, they will see this note and might refuse your loan application or ask you to pay a high interest rate as you’re now considered to be a subprime borrower.

So if you’ve declared bankruptcy and suddenly need a bit of cash to pay for an emergency expense in between paychecks, where can you turn? Fortunately, you should be eligible for a payday loan, also known as a cash advance, to tide you over until your next paycheck. The difference with payday lenders is that they generally don’t look at your credit record when you apply for a loan. In other words, they don’t care if you’ve filed for bankruptcy. Some payday loan companies do check if you ask for over $500, but since so many of them don’t bother you can always find a lender that will take you on as a customer if the first one turns you down.

How do payday loan companies determine whether to approve your loan application? First and foremost, they look at your income to make sure that you’ll be able to pay them back. Most lenders require that applicants have a monthly income of at least $1,000, and that they have a bank account and are 18 or older. Your income can come from a job, child support or a pension, or from social security or other regular government benefits.

Another benefit of taking out a payday loan versus trying to get a regular loan when you’re bankrupt is that payday lenders charge everyone the same interest rate. Since they don’t discriminate against people who’ve gone bankrupt they don’t require higher interest payments you, even though other lenders would regard you as a high credit risk.

When you’re trying to repair your credit after bankruptcy, it’s very important that you pay all your bills on time to avoid slipping further down the credit ladder. That means you’ll have to find a way to raise extra cash to cover bills that are falling due, if you suddenly find yourself short. A payday loan can be the ideal way to bridge the gap between paychecks while ensuring that your credit report and credit score don’t suffer. No record of your having taken out a payday loan will appear on your credit history – unless you default on it, that is.

Naturally, you’ll need to manage you payday loan sensibly, and pay it back quickly to avoid running up huge interest charges. Remember that this is supposed to be a short-duration loan only. If you’re in a bind, and especially if you’re bankrupt, a payday loan can be a godsend, however.

Related posts:

1. 7 Credit Score Pitfalls
2. Payday loan terminology
3. The Recession is Here: Avoid Big Ticket Items
4. The Best Ways to Use a Payday Loan
5. Why Was My Cash Advance Application Denied?