Why Personal Loans After Bankruptcy Are More Than A Possibility

Many people who are facing insurmountable debts bow to the pressure to declare bankruptcy. It is not an ideal solution, but unfortunately, economic reality makes it the only practical choice. But the good news is that getting personal loans after bankruptcy is now more likely, with more lenders willing to accept the role that circumstance played in the decision.

This is a very different situation to a few decades ago, when declaring bankruptcy left a serious stain on a credit reputation, causing many traditional lenders to steer clear of such applicants. Getting a loan shortly after bankruptcy was almost impossible, but today it is a very real possibility.

With that in mind, the option to take such lengths in order to escape from crippling debt is more common. The fact that loan approval despite bankruptcy is an option later on means it has become a strategic choice. But are future personal loan options not affected at all?

Justifying Loan Approval

Despite the reduced stigmatization that bankruptcy has today, there is little reason to celebrate it as an option. There is still some hesitancy amongst lenders to approve applications seeking personal loans after bankruptcy. But at the same time, there are benefits, not least the fact that financial pressure is alleviated.

But, what about when a new loan is applied for? What is needed to secure the green light and be granted approval despite bankruptcy? Well, like any loan application, it is affordability that really matters – not the credit history of the applicant. So, as long as the applicant has a full-time job and has a low enough debt-to-income ratio, approval is possible.

And the ratio should be no problem at all, since through bankruptcy the applicant will have seen all of his or her debts cleared anyway. That effectively clears the way to getting a new personal loan.

Terms To Accept

Having a route to much-needed loan funds is great to know about, but actually securing that loan is not a foregone conclusion. Applicants need to understand that the consequences of bankruptcy include making future loans expensive. Lenders willing to grant a personal loan after bankruptcy will also charge higher interest rates.

What this means is that the monthly repayments on any loan are going to be that little bit higher, which in turn raises questions over the affordability of the whole deal. But with no other significant loans to repay, the chances of being granted approval despite bankruptcy are pretty high anyway.

Also, the size of the loans are usually limited with some lenders not willing to go over $10,000, and only comfortable with about $5,000. The term of the personal loan is usually short too (5 years). This is because bankruptcy cannot be declared a second time for a minimum of 6 years after the first, and lenders want the life of the loan to end within that period.

Securing Loan Approval

So what are the best ways to help an applicant on the road to approval? There are a few ways to do so, but probably the most effective when seeking a personal loan after bankruptcy is to improve your credit score in advance.

This is usually done by clearing a few debts, but since loan applications might be hard to get, it would be worth taking out a secured credit card instead. The balance can be small, but regularly making repayments for 6 months means a positive credit history is achieved.

It would also be worthwhile getting a cosigner to guarantee monthly repayments on the personal loan. This reduces the risk involve in the loan to practically nil, so approval despite bankruptcy is safe.

You Can Get a Personal Loan After Bankruptcy

Having survived bankruptcy, you may think that your world is topsy-turvy. Well, that is not exactly true. Your declaration may leave an indelible mark on your credit history that is hard to entirely escape, but remember, you are not the only one. Over 250 thousand bankruptcy declarations are filed every three months in this nation. Many of these are due to the economic and financial turmoil the global economy that has dealt us all some hurt this last half-decade.

Joblessness, Illness, Bad Luck

The unemployment rate, perhaps poor health, or just plain old bad luck, have caused many to become behind on important monthly obligations such as housing or transportation or grocery bills. When these unpaid obligations start to pile up, they can have a snowball effect and get worse with each ensuing month. As a last resort, to protect whatever assets are still surviving, some have no other recourse than to declare bankruptcy. Having come out of bankruptcy, many should consider it as a way to wipe the slate clean and start rebuilding toward the future and improving their creditworthiness.

Up by the Boot Straps with a Personal Loan after Bankruptcy

Rebuilding your creditworthiness and your good name could very well start with taking out a personal loan. Whether taking out a secured or unsecured loan, go for it. One secret is to not stop borrowing. Just remember that an unsecured loan will charge you a higher interest rate than a secured loan. A secured loan is one that is backed by an asset you own, such as real estate or a vehicle. Whatever transpires, please do not neglect this loan in terms of repayment on time every time. You are being granted a second chance and it would be wise to not spoil it.

Potential for Repayment

Depending on factors such as collateral, salary, and even personal recommendations, personal loans are available that range from $500 to $20,000. Income will be a primary consideration when loan amounts are figured. Some financial advisers suggest that individuals who have experienced a bankruptcy can start at $5K or below for a first personal loans ensuing a bankruptcy discharge. If the need is great and the payback potential great, a loan could be higher than that.

Some Extra Help

If you have no collateral, your best bet for a personal loan after bankruptcy would be to have a financially secure cosigner. Unsecured or no-collateral loans are riskiest for lenders so interest rates will be high. To lower these rates, having a cosigner would be a good way to land a personal loan after bankruptcy. The cosigner must be aware that they are liable for the loan should you default for whatever reason.

Seek Far and Wide

Because there are so many folks who have found themselves financially strapped, there are many private lenders who have stepped in to answer the calls of the market regarding personal loans after bankruptcy. You will find a plethora of these lenders on the internet. Simply punch bankruptcy loans into your favorite search engine and you will be rewarded with many lenders willing to take a chance on bankruptcy clients. You will pay higher than usual interest rates, but you will also find that they can be lower than expected due to the competition in the market. As you can see, it is possible to get a personal loan after bankruptcy.

How to Get a Personal Loan After Bankruptcy

How to get personal loans after bankruptcy? This is a question that every person who has suffered bankruptcy has to deal with. Bankruptcy leaves your credit in bad repair, but fortunately all is not lost. You can indeed do some things to fix up your credit.

The first thing you absolutely need to do is take out your credit report from the three major credit agencies and see if there are any errors in the reporting. Your report should be up to date and any inconsistencies should be reported to the publishing credit card company.

You should also look for the bankruptcy notice on all the credit reports. If it’s missing from any of them, contact the reporting credit agency about this. You may be required to forward your bankruptcy documents to them as proof.

If you are looking to apply for personal loans after bankruptcy, you are going to need to work on your credit right after the bankruptcy discharge. This is because most lenders will not lend to anyone with a bankruptcy discharge on their credit records for less than 2 years. Now this is not a “firm” rule and there are some exceptions, but as a rule of thumb you are going to have a much more difficult time trying to gain a loan in less than two year period. This rule virtually applies to anything credit related such as after bankruptcy car financing, after bankruptcy mortgage financing, etc.

If you use the two years following bankruptcy to improve your credit history by paying all bills on time, you stand a good chance of getting the loan you need. You can take out a secured credit card from a bank or from online and use this as a credit source to purchase items and pay off the card each month. This is the best way how to get personal loans after bankruptcy.