Because there are many misconceptions regarding bankruptcy, it is common for people to discount this option when considering how to handle their outstanding debt. In particular, some Louisiana residents may mistakenly believe that they will never be able to get a loan after filing for bankruptcy. Fortunately, that is not the case, and while this method of debt relief can affect credit, it does not have to remain permanent.
Because loans and interest rates are a concern for individuals considering bankruptcy, it may help them to take a closer look at the differences in how much borrowers pay on loans before and after bankruptcy. One loan company conducted a study that indicated bankruptcy filers tend to pay over $2,000 more on a $15,000 auto loan when applying for the loan within a year of completing bankruptcy. Of course, anyone with a low credit score tends to face higher interest rates.
Bankruptcy does lower credit scores, but individuals can work to raise their scores over time. In fact, when individuals apply for a car loan two years after completing their bankruptcy proceedings, they tend to pay just $799 more on a $15,000 auto loan than someone who has not gone through bankruptcy. So while the cost may increase after bankruptcy, it may be far less detrimental than many people could have thought.
If the idea of never qualifying for a loan or having to pay an outrageous amount in interest on loans is holding someone back from filing for bankruptcy, it may prove wise to think again. Rebuilding credit after bankruptcy can happen in many ways, and Louisiana residents could even come close to raising their scores to the national average. For individuals interested in dispelling more myths regarding this form of debt relief, speaking with knowledgeable attorneys may be beneficial.
Source: fool.com, "Here's How Much Borrowers Pay on Loans After a Bankruptcy", Chris Neiger, April 21, 2018