Can I Get A Payday Loan While In Chapter 13?

Financial management and complexities can increase when you have to file for Chapter 13 Bankruptcy. 

While you promise to pay back your debt via a plan, you’re struggling with money. In such situations, payday loans become a quick option for many.

While these loans may seem tempting, entering the loan cycle without the necessary knowledge can be dangerous. These short-term, high-interest loans come with many risks. 

Let’s talk about the impact of Chapter 13 on payday loans, what to consider before talking to a vendor, and ways to get back to a better credit score.

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What Is Chapter 13 Bankruptcy?

Wage-earner’s plan or Chapter 13 Bankruptcy is a plan for people having trouble with their payments.

Applicants have to work with a court-appointed trustee throughout the repayment process. You can create a 3- to 5-year plan to pay your debts to the creditor. Your income and other expenses can be considered while developing the required plan. 

You can save your property and other critical assets, like a car, here. However, you must ensure timely repayment of mortgages and car loans. You can also include your credit card dues.

You might be able to get a personal loan during Chapter 13 bankruptcy, depending on the rules for the types of loans allowed in Chapter 13.

You can go for Chapter 13 Bankruptcy if you have a steady income. 

Impact of Chapter 13 Bankruptcy on Payday Loan Eligibility

Chapter 13 allows the individuals to create a plan for debt repayment. Here is a list of the impacts of Chapter 13 bankruptcy on Payday Loans. 

1. Your credit score will reduce after declaring bankruptcy. This reduction may make it difficult to get a payday loan. 
2. You will enter the public record of bankruptcy. This record stays for at least seven years and is available to everyone. Lenders may not feel confident about giving you a loan because of your repayment status. 
3. Payday loans are designed for quick fixes. Therefore, even if you get a payday loan from a lender, you do not want to fall back into debt and repayment. 

Lender Policies On Chapter 13 Bankruptcy

Here is a list of some lender policies and related information you should consider before applying for a payday loan. 

1. Chapter 13 Bankruptcy reduces your credit score and makes your credit report negative. Lenders may not consider low credits and may not help you with a loan. Try improving your credit scores with timely payments.
2. Lenders can impose a waiting period of 1-2 years after declaring bankruptcy. This waiting time is less than in Chapter 7.
3. If you can repay your Chapter 13 payments, lenders may favor you over other applicants with bankruptcy.
4. Lenders prefer applicants to have all their documentation ready with accurate information on every financial aspect.

Timeframe for Loan Eligibility After Chapter 13 Bankruptcy

Compared to Chapter 7 Bankruptcy, Chapter 13 provides a better time frame for loan eligibility. Multiple factors like Chapter 13 repayments and credit score improvement will affect your loans. Here’s what you should know about the potential loan eligibility timeline.

1. You can get secured loans and credit unions 1-2 years post-discharge. 
2. Appliers can get FHA Mortgages 1-year post-discharge. However, full repayments and other conditions should be completed. 
3. Conventional Loans have a period of 2-4 years after discharge. Further, it can depend on the lender. 

Factors To Consider While Applying Payday Loan After Filing Chapter 13

Before applying for a payday loan after Chapter 13 bankruptcy, here are some factors to consider. 

Credit Requirements Become Strict

Your credit scores will deplete after you apply for Chapter 13 Bankruptcy. Most payday lenders rely on credit scores to check your eligibility.

If they don’t find the required scores, they might not help you with the loans.

Debts

Payday loans are considerable for short-term payments. However, they have significantly higher interest rates. If you get into the cycle of debt with these payday loans, you may never get out and regret your decision later. 

Considering Alternatives

You can explore alternatives when facing financial issues. You can contact creditors and discuss help and payment plans with your current situation. On the other hand, we have Chapter 7 which is quicker and cheaper

Further, you can get emergency funds without interest on platforms like Beem. Moreover, check credit card unions and get income advance programs for better access to funds. 

How Long Does It Take To Rebuild Credit After Chapter 13?

Rebuilding your financial portfolio and credit score after Chapter 13 Bankruptcy declaration can be complex. You have to make consistent efforts and be patient with your payments.

• You may have to wait for 1-2 years before creating a positive impact on your credit scores. 
• Chapter 13 Bankruptcy has a less severe impact than Chapter 7. 
• If you’re working on a constant income and following your plan of on-time payments, your credit scores can improve early. 
• You can get a secured credit card and use it responsibly. Keep your credit utilization score low. 

Will My Credit Score Go Up During Chapter 13?

Your credit score may not immediately shoot up after filing a Chapter 13 Bankruptcy. However, with patience and effort, you can slowly build your credit score. 

1. Creating a plan to repay after filing bankruptcy is one of the most significant benefits of Chapter 13 Bankruptcy. 
2. You can make a consistent plan and follow it to reduce overall debt. 
3. The repayment plan shall be court-approved. If this plan is under required execution, it will help your credit score after discharge. 
4. Chapter 13 Bankruptcy is better than Chapter 7 as it makes you look serious about taking responsibility by repaying your dues.

Saving More and Spending Less with Beem.

Payday loans are great when looking for quick access to funds. However, they come with considerable interest rates and negative outcomes. In most cases, you may not even get payday loans due to low credit scores and Chapter 13 Bankruptcy records. 

Try Beem and get emergency funds now! You can sign up in minutes and subscribe to receive anything between $5 and $1,000. This platform is a go-to for more than 5 million Americans. 

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