Personal Loans After Bankruptcy: Why Approval Is Not Impossible

While it is true that lenders are reluctant to lend money to those applicants who have been declared bankrupt in the recent past, it would be a mistake to think that approval is out of the question. Getting a personal loan after bankruptcy is really down to approaching the right lender and finding the right terms to suit the reality of your situation.

Of course, there is no denying that bankruptcy is a serious matter, and it is impossible to get excellent loan terms until credit status is recovered fully. But it is possible to secure approval despite low credit scores from lenders who are willing to accept the extra risk in the knowledge that the borrower benefits more from maintaining repayments than abandoning them.

But what can an applicant expect from a personal loan application process when they are beginning their recovery from bankruptcy? What is needed to convince the lender that their investment is safe?

Satisfying Qualification Requirements

The first step in submitting an application for a personal loan after bankruptcy that has any chance of success is to ensure all of the qualifying criteria are fully satisfied. This means that proof of a reliable source of income is necessary.

In most cases, lenders will only consider applicants that have a full-time job, and have held it for a minimum of 6 months prior to submitting their application. Admittedly, this is normal when seeking approval despite bad credit scores, but it is essential in this case because lenders need to know that repayments are possible.

Proving affordability is also essential, so it is a good idea to apply for only small personal loans. Even if $10,000 could be handled comfortably, only seek $5,000 to ensure the lender sees no issue at all with affordability.

The Terms To Look For

Obviously, the loan terms affect your chances of approval on a personal loan after bankruptcy. With that in mind, it is important to center attention on matters like interest rates and repayment periods. These can be crucial in establishing affordability.

For example, even if the interest rate is not great, a longer repayment period means that the size of the monthly repayments is smaller. This means the pressure to meet repayments is lower, and so getting approval despite low credit scores is much more likely.

Remember, however, that as an applicant seeking a first loan since bankruptcy, it is necessary to accept compromises that may seem expensive. But by repaying these personal loans without a hitch, the road to financial recovery is assured, so the extra expense is worth it.

Unsecured or Secured Loans

There are some other considerations too, not least whether to seek an unsecured or a secure loan. Without doubt, it is much harder to get an unsecured personal loan after bankruptcy, with the lack of assurance making more lenders reluctant to even consider approving the loan.

It is possible to get a small unsecured loan, but the terms may be too expensive to accept. A secured loan is much more likely to be approved because the lender is protected from any losses. It may be an idea to find a cosigner too, to offer a guarantee repayments will be made. This makes approval despite low credit scores almost certain.

Finally, there are ways to improve your credit reputation before seeking a personal loan. For example, get a secured credit card and made the necessary repayments on time. After just 6 months of regular repayments, lender will have a track record that indicates reliability.

How to Get Approval for a Personal Loan After Bankruptcy

The problem with anything you do after you’ve had a lot of financial trouble show up ony our credit report is that lenders don’t trust you. They make their decisions on who to lend to based on how likely it is that you will repay them. When you have other factors on your application, like collateral, they can try and take those into account to balance out your application.

When you’re looking at how to get approval for a personal loan after bankruptcy, however, you are looking at unsecured financing, or financing that is based solely on your credit history, which is not in the best of shape. There are still things you can do to make this work for you, and ways to build this into an overall credit building plan, though.

What you’ve done since you discharged your debts is going to be a big factor on your application. You’ve got this new start, sure, but a blank slate (that only really says you had problems in the past) doesn’t really do much for you. You need to build new positive things on there. Immediately after you’ve finished going through the bankruptcy process is going to be a really tough time for you to do anything financially. If it’s been at least nine months or so though, and you’ve done some other things to start building up a history immediately, it’s going to make things a lot easier for you.

It may seem like there is nothing for you to do with your situation, but there are products built specifically for your situation, such as secured credit cards. For these, you put up a few hundred dollars that will be put into a savings account and used as your collateral (you’ll get it back as long as you make all of your payments) and then can use your credit card just as you used your unsecured ones in the past. For the best credit building purposes use under thirty percent of the limit and pay it off in full each month.

Making these small steps can be hard and exhausting, but help improve your situation. You also need to have a steady income that can cover your monthly loan payments if you get approval for a personal loan after bankruptcy. Having signs of stability, like having the same job or residence for years at a time, can also help out your application. When you go to apply they will ask you what caused you to claim bankruptcy-do not get too far into this, keep it short, about two sentences. Whether it was medical, divorce, a natural disaster, or credit cards, be clear and to the point. They will care about why this happened.

And, as always, make sure to shop around and read the terms and conditions before signing anything, so you don’t get in over your head.

Personal Loan After Bankruptcy – The 3 Main Things a Lender Will Check Before They Consider You

If you are applying for a personal loan after bankruptcy, it is important to know what steps a potential lender will take prior to any approval. Many people, mistakenly believe they will not qualify for any form of credit for a long time.

However it is possible to get a personal loan after bankruptcy. Here is an insight into what your lender is looking for:

1) Your current employment status is of the utmost importance. In addition, how long you have been with your current employer. If you have recently just started a new job, then forget about trying to get a loan. A lender would “like” to see you with your current employer for at least 2 years. But they can be flexible. A lender would definitely not consider anyone for a loan who had been in their current position for under 6 months.

2) Your credit score and report is the next thing a lender would look at. You know that if you have filed for bankruptcy, your credit score will not be very good. So be honest about this up front. There are usually 5 different types of response to your credit report, depending on which lender you approach:

a) We do not accept anyone who has filed for bankruptcy

b) Accepted if you filed for bankruptcy over 2 years ago

c) Only if you filed over 5 years ago

d) We will accept you as long as you have at least 2 forms of unsecured credit

e) We will accept anyone and provide a loan to everyone

An important point – as you work your way down that list, the more you can expect to pay in APR, interest and possible fees.

3) Do you have any form of security to provide? Usually when applying for a personal loan, the outcome is decided by your credit record alone. As it is unsecured, you do not need to provide any security. However, when applying for a personal loan after bankruptcy, you are viewed as a higher risk. Speak to any family or friends who have a decent credit record and may be willing to co-sign on your loan. A lender will view this very favourably.