Personal Loans After Bankruptcy

While all forms of bankruptcy can affect your ability to get a personal loan, what you do afterwards pretty much remains the same. The problem with applying for personal loans after bankruptcy is that creditors are very reluctant to lend to you with such a blemish on your credit report. In the case of most bankruptcies, that black mark stays on your credit report for up to 10 years.

After a Chapter 13 bankruptcy, you will typically have 3-5 years to pay off your debts or whatever agreement that was concluded at your bankruptcy hearing. The good thing about a chapter 13 bankruptcy is that you aren’t forced to liquidate your assets, which means that you might be able to keep your car or home.

With a Chapter 7 bankruptcy, you would have most likely have had to liquidate your assets. Having no assets can make life after your bankruptcy a bit more challenging.

With both types of these bankruptcies, getting a personal loan is best sought out 2 years after your discharge has been granted. However, 2 years is a long period of time to wait. Getting a loan after bankruptcy doesn’t have to be complicated, so let’s look some options for getting a personal loan after 2 different chapters of bankruptcy.

Personal Loans After Chapter 13 Bankruptcy

The “assets” that you may be able to keep after chapter 13 bankruptcies, "The Wage Earner’s Plan", are your home and/or automobile. Because a bankruptcy creates a deep dark blemish on your credit report, lenders are more apt to lend money to someone who has collateral. In this case, collateral may be your house, automobile, or other investments that are considered assets.

While you will still have all of your bad credit blemishes on your credit report, with time they will gradually fade out. Here are some things to consider when rebuilding good credit:

A) Rebuild credit using secured credit cards. Since you have assets, credit card companies can use them as collateral. By making payments on time each and every month, you will gain positive notes in your credit report.

B) If you still need to make payments on your house and/or automobile, then need to continue to making payments on time. Creditors want to see that you have the ability to make payments on time. It looks very good in your credit report.

C) If there are some blemishes on your credit report that can be disputed, then dispute them. The credit reporting industry is not perfect and sometimes mistakes are made. If you notice any mistakes, then you should contact any of the 3 major credit reporting agencies immediately (Equifax, Transunion, Experian). It is possible to have these mistakes to be completely eliminated from your credit report.

Personal Loans After Chapter 7 Bankruptcy

After a Chapter 7 Bankruptcy discharge, you are basically left with no credit and no assets. The good news is that your credit report becomes a clean slate. But starting from a credit score of 0 is not easy in today’s credit based society. There are ways to build a good credit score and to have creditors wanting to lend you money.

Here are 6 ways to build good credit history with no credit or bad credit:

1. Co-signer - A co-signer will use their good credit to help you apply for a loan and take the burden of the debt if you are unable to pay for it. Most creditors have no problems lending money to someone if they have a good cosigner because the creditor knows that they will be able to get their money back in the event you are unable to make the agreed payments.

2. Secured loans - Sometimes a Chapter 7 Bankruptcy will leave you with some forms of assets. This is very good news because having collateral to put up against a loan will give you a better chance to get one. There are personal loans for people with bad credit, you just have to keep searching for one that will work for you.

3. Car Loans - Applying for car loans after bankruptcy are one of the best options for anyone who has gone through the perils of bankruptcy. The creditor is satisfied because there is collateral that they can take back in the event of trying to recover the unpaid debt, and you will build good credit as long as you are making payments on time. By having a vehicle, you will be able to get to and from work, or find employment that is no accessible by public transit.

4. Payday Loans - If you are in a crunch and have a job, then a Payday loan might be something to consider. Payday loans usually don’t perform credit checks, just as long as you have proof of employment. The downside to these types of loans is that they don’t build your credit, and their interest rates are astronomical.

5. Home Loan - While getting a mortgage after bankruptcy is challenging, it is not impossible. You may have to wait a couple of years after your discharge and have some good credit already built before getting a home loan. However, if you are buying the home together with someone else who has great credit report, the chances of success is much easier.

6. Credit Cards - Whether you have good or bad credit, you should be able to obtain a credit card. Unsecured credit cards after bankruptcy usually come with higher interest rates and lower credit limits. But even if you are only granted a $500 credit limit, use it and make sure that you are able to pay it off each and every month. After a year of good report, you should start noticing changes in your credit report.

To build good credit, you should also try to diversify and use as many loan and credit sources as possible. But it is important to stay within your means. There is no sense in trying to rebuild credit, only to have you back in the same bankruptcy situation that you just came out of. However, when rebuilding after bankruptcy, you really want to have a great credit history as quickly as possible.

Getting personal loans after bankruptcy can be challenging, but it is important to keep exploring your options and be persistent. If you get turned down, find out why and how you can improve your chances of getting that loan or credit. Creditors, banks, and other lenders really want to lend you money. All that you have to do is give them a good enough reason to. The easiest way is to demonstrate your ability to make payments on time.