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How to manage interest rate hikes after personal bankruptcy

One of the biggest concerns people have when filing for bankruptcy is how it will affect their credit score. Credit scores can affect many things for individuals in Connecticut, from their ability to rent an apartment to the cost of leasing vehicle. However, a recent study from LendingTree showed that while those who have filed for personal bankruptcy pay more on loans, there are certain ways to lessen the load by demonstrating positive repayment habits.

So how much more do people pay in interest when their credit score involves personal bankruptcy? The answer depends on the purchase. With a car loan, for example, borrowers who have recently filed for bankruptcy can expect to pay $2,171 more on a five-year, $15,000 loan. Mortgages also cost significantly more when the borrower has filed, though credit score tends to be more important in these cases than bankruptcy history.

Personal loans often come with higher interest rates since they are not secured by collateral like a house or car. The interest rate on a $10,000 personal loan obtained within a year of filing for bankruptcy will be about $1,426 higher than it would have been without the bankruptcy. Once again, however, credit score plays a role.

How can a person who has filed for personal bankruptcy still have a decent credit score? It can take some time, but there are things that can be done. In fact, LendingTree noted that the credit score for 65 percent of borrowers who had filed for personal bankruptcy had improved to 640 just two years after the fact. Along with good financial habits, following legal guidance from a Connecticut lawyer is important in managing a bankruptcy properly and making sure it does not negatively affect things long-term. 

Source: fool.com, "Here's How Much Borrowers Pay on Loans After a Bankruptcy", Chris Neiger, Accessed on May 20, 2018

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