So when is the best time to apply for a bankruptcy equity home loan? It’s possible for you to apply for a loan as soon as your bankruptcy has closed, although if you can build your credit just a little beforehand, you’ll end up with lower interest rates on the loan. Interest still applies to a home equity loan, though it does in a smaller way than any other loan – and of course it is still based on your credit rating. So if it’s possible to build back some credit score beforehand, by all means do so.

A home equity loan may be a good loan option even if you’re not faced with bankruptcy per se. This type of a loan is more cost efficient in the long run, as opposed to refinancing your mortgage, going for a consumer loan or furthering your line of credit.  Refinancing a mortgage can not only include closing costs (which can add up to thousands), but also carries higher interest rates depending on how bad your credit is. Consumer loans and furthering credit will cost you even greater interest, as well as any other additional fees or charges agreed upon by you and the lender.  So if the idea of a home equity loan is to pay overdue bills or consolidate debt, this method will end up costing you less over time, and therefore you will be able to get clear out of debt at a much faster pace.  Another plus side to a home equity loan is that you can typically take as much time as needed in order to pay it off.

You can save yourself thousands of dollars (at least) by simply shopping around to find the best offer. While keeping track of all your quotes, manage your credit rating and make sure all your credit reports are accurate. If you think you’ve found the best deal, don’t stop there. Ask various friends and family members if they can recommend a lender to you. Also check online and pay attention to advertisements in regards to home equity loans, you never know where you might find a better deal. Comparison shopping is key here if you want to save yourself money, I cannot stress that enough.

Once you’ve gone to a number of loaners, it’s time to start choosing which offer is best. Compare the interest rates, monthly payments, and the overall terms of the agreement. If the most desirable offer is not apparent at this point, side with the more reputable and/or familar company.

Before you take action and sign an agreement, consider if a home equity loan is truly your best option or not. This is a big endeavour, so taking some additional thought and considering all of your loan options doesn’t hurt. Also, plan your budget ahead of time, making sure the loan will give you the leverage you need in rebuilding credit, consolidating debt, seeking further education, etc versus the potential burden of taking another loan in the first place. Managing your money and setting your priorities on paper will help your peace of mind as there’s a lesser chance of any financial ’surprises’ down the road.

Consider insurance as an option to be able to cover your loan payments in case something unexpected happens. It’s better advised to try and set up a monthly payment plan instead of all up front, for better debt consolidation purposes.

All this added up can be a lot of work and you may also wish to seek the help of a professional (such as a bankruptcy lawyer) to help you through this complicated procedure.

Remember to pay back your home equity loan on time as they may be able to charge you additional fees (collection fees, attourney fees and appraisal fees to name a few) that may be included in the fine print of your original agreement. You can’t delcare your home equity loan in bankruptcy, unless of course you surrender your home.

Let’s say you have a total credit card debt of $20,000 at an interest rate of 16%. The minimum payment of this debt is 2.5% per annum. If you so chose to pay the minimum payment in order to clear your debt, you’re looking at approximately 38 years to bring this debt balance back to zero. The interest generated over this 38 year span will equal approximately $30,000, more than the original amount owned in the first place, and totals $50,000 in the money you actually pay back. Most of us simply don’t have that many working years remaining, and those that do probably don’t want to spend 38 years clearing their debt.

If instead you were able to put the same amount of money into a retirement plan each year, you will end up having significantly more in the end. Mathematically, if you invested the same amount it took to pay off your debt ($50,000) into an RSP that generated 6% interest, you would end up with about $315,000 to put towards retirement after 38 years.

Of course filing bankruptcy should be considered only if your debt is too overwhelming. Bankruptcy will ruin your credit, and make other aspects of your life more difficult. You may find it impossible to hold onto credit cards (even bank accounts), apply for a loan, rent a car, or in some cases even get a job. Bankruptcy can be avoided by keeping a strict budget based on your earnings. Credit cousiling is available to you if you are having problems working through your debt or finding your budget unmanagable.

Here are some things to consider whether or not to file for bankruptcy:

• Your age – the older you are (the fewer working years you have remaining) should be considering when figuring out the time it should take you to pay off your debt reasonably
• How many dependents you have – you should be more inclined to file for bankruptcy because having multiple dependents will take up a larger portion of your earnings
• The size of your debt – the larger it is, you should obviously lean towards filing bankruptcy
• Your cash reserves, assets, and existing retirement savings – all these can be used to successfully get out of debt and plan for a more abundant future

Debt consolidation can be effectively put into practice especially when paying off a credit card debt, as those typically have high interest rates in comparison to a secured loan. Due to the lower interest rates of a secured loan, the credit card debt or unsecured loan can be payed off quicker, incurring less interest from all of your debts combined. This allows you to be able to pay off your debts quicker and more cost efficiently.

Don’t wait until your debt becomes too out of hand before considering consolidation, otherwise loaners might use this knowledge against you and not offer you that great of an interest rate. Some scandalous companies are able to do this because they know that your options are limited, and some may even wait until you are backed into a corner and forced to either refinance your mortgage or take out an equity loan (as opposed to losing their car or home), and at this point it’s hard to comparison shop.

There are many debt consolidators out there who will get you started in the right direction. They will likely work with you to come up with a personalized debt management plan so that you don’t feel like you’re being forced into a method that doesn’t work for you. In most cases they will be able to consolidate all your unsecured payments into one easy monthly payment, and you’ll quickly be on track to recovering your finances. Again, make sure you choose the right people to work with to help you consolidate your debt. Check their reputation and perhaps their rating with the Better Business Bureau. Choosing a less than reputable company can put you in a much worse place than you started – some charge ridiculous fees and are highly unethical in their practice.

With the right tools, knowledge, and guidance, you’ll be on the fast track to effectively recover your finances using debt consolidation.

• Make sure your bills are paid on time, and in a consistent fashion. This is probably the most important factor that determines your credit score. Occasional late payments aren’t a huge deal however, if this becomes a habit it will likely be detrimental to your credit rating. Also make sure you’re no later than 60 days on an individual payment.
• Your balance-to-limit ratio must be kept reasonable. This ratio compares the amount of credit currently used to the total credit available to you, the borrower. Keeping this low (having not much debt with a higher percentage of available credit) is good for your credit rating. In turn, a balance over 75% is considered high and will affect your credit rating negatively.
• Keeping a reasonable amount of unused credit. Don’t try and get yourself a huge line of credit especially in proportion to your earnings. Banks and credit unions will look at this and automatically classify you as a high risk borrower.
• Don’t inquire about/open multiple credit accounts within a short period of time. Inquiries should be limited to one or two per year and new lines of credit should not be opened up if you are not able to keep your existing ones under control. This type of ‘credit frenzy’ can make lenders nervous and is also bad for your overall rating.
• Have patience, credit doesn’t build itself over night.
• Maintaining a well balanced mix of your accounts, both ‘revolving’ credit accounts as well as installment loans, will show that you can maintain your finances responsibly.
• Keep tabs on your own rating. Nobody else is going to do this for you. Some companies will even neglect to tell you if you account status with them has changed. Also check your credit report frequently to make sure that it is accurate and without error. Keeping an eye on your credit at all times is of utmost importance.