Here we will discuss, how you can get a personal loan after a bankruptcy as you know going bankrupt can be difficult and frustrating. Your credit can be affected for seven to ten years, making it difficult to get loans.
The good news, though, is that you can still get a personal loan after you go bankrupt. It may not be easy, and you may have to pay higher interest rates, but it is possible.
Here’s what you need to know about getting a personal loan after bankruptcy.
Different types of Bankruptcy and Personal debt:
The way you end up with bankruptcy can make a difference in whether you can get a personal loan. In most cases, you can apply for a personal loan (and you can get one) immediately after the bankruptcy proceedings are over. Two types of personal bankruptcy that can affect your ability to borrow.
Debt Forgiveness is the most common type of bankruptcy used for individuals. A court-appointed trustee will oversee the liquidation sale of your assets, anything you own that has value, to pay off the people you owe money to. The remaining debt such as credit cards or medical bills is erased and your credit cards will all be canceled.
In order for you to keep the stuff you own so it doesn’t end up in the liquidation sale, you will need to recommit to the loan agreement and continue making payments.
Filing for Chapter 7 bankruptcy can stay on your credit report for 10 years and you won’t be able to for it again for eight years.
Even though you file for Chapter 7 bankruptcy and most of your debt is liquidated some types of debt are not included and you will still be responsible for it. These include taxes, student loans, child support, and if your home is in foreclosure.
Chapter 13 Bankruptcy : Reorganization
Unlike a chapter 7 bankruptcy where you have debt forgiveness, a chapter 13 bankruptcy reorganizes your debt and makes a payment plan so you can back a portion of your debt. The pay back period is three to five years.
The monthly payments usually depend on your income and the amount of debt you owe.
You will be allowed to keep your assets, unlike a chapter 7. A chapter 13 bankruptcy can also stop a foreclosure, allowing you time to get your mortgage up to date and on good terms.
With Chapter 13, bankruptcy will eliminate your credit report in seven years.
Anyone that has unsecured debt (credit cards, medical bills) less than $419,275 and secured debt (mortgage, auto loans) less than $1,257,850 can file for chapter 13 bankruptcy.
How Does Bankruptcy Impact Your Credit Score?
Bankruptcy can have a huge impact on your credit score, and the higher your score before bankruptcy, the significantly lower it will be. The more time you have since the bankruptcy, however, the better your score will be and the more likely you are to succeed in your loan application.
You can apply for a personal loan at any time after bankruptcy, but you may have to pay a higher interest rate or you might be rejected for a loan on a regular basis. The length of time it takes to get a loan can vary. As a result, it may make sense to wait a year or two before taking out a loan. As when you file for bankruptcy, you are showing lenders that you couldn’t pay back your debts in the first place so you will need to start over and build trust.
Looking for a personal loan after bankruptcy :
When you are ready to apply for a personal loan after bankruptcy, here are some steps to follow:
Check your credit reports: Get copies of your credit reports from AnnualCreditReport.com and make sure the information is accurate. After bankruptcy, you should be included in the debt and show zero balance. Check again that your Chapter 13 Debt Accounts are being properly reported, now that you are paying by consensus.
Prove your income: As soon as you apply, you will need to prove your income. Salary stubs, W-2s, and other documents can show that you have enough income for the loan – even though you have bankruptcy. Try to include side income or spouse’s income in the calculation, so lenders will see you as less risky.
Related: How To Get A Loan With Bad Credit
Prepare an explanation:
You can write a letter about the circumstances that led to the bankruptcy and how you are resolving the issue. If your bankruptcy is due to medical expenses or some other unforeseen problem, you may get a break.
Compare terms with different lenders. Look online for the best personal lenders what terms are being offered to you. You may not be eligible for the best rates, but you can still get something cheaper. Compare with online offers that may be available at your bank or local credit union.
Related: Best Loan Companies for Bad Credit
Avoid high prices and fees:
While you may have to pay higher rates when you take out a personal loan after bankruptcy, there is no reason to pay higher rates. Look out for paid lenders and others who advertise that they do not do credit checks. If you can get a loan, the fees and interest can be so high that you get back into the debt cycle.
Alternatives to personal loans:
If you can’t qualify for a personal loan after bankruptcy, you have some options. If you can’t get a “regular” personal loan, here are three things to try.
Secured Credit Cards:
Instead of getting a personal loan, consider getting a secured credit card. You need to provide cash as a security deposit, but many secured cards report to the credit bureau to help you pay the payment date. Also, interest rates are likely to go down with a secured card that you see with a lot of bad credit personal loans. Best Credit Cards for Bad Credit
If you have a loved one who agrees to share the debt, they can sign. The lender looks at their credit history and scores instead of you, giving you a way to get a loan.
You can rebuild your credit and save money with a Fresh Start Loan. It is for anyone who has filed bankruptcy within the past 12 months. You can borrow up to $1,000, which will be held in an account for 12 months with a fixed interest rate of 18.99% APR. You will need to make regular monthly payments and pay the interest.
However, in all these cases, if you want to improve your score, you need to make a timely payment. Once you use these methods to increase your score. You may be more successful in your next attempt to apply for a personal loan after bankruptcy.
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