Personal Loan after Bankruptcy
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Nowadays, many people file for bankruptcy because they can’t afford their debts or have other financial difficulties.
If you took the same step in the past, now you may think that you won’t be able to qualify for a new loan for a long time, but it’s not true!
For Chapter 7 bankrupts, it takes two years for you to qualify for personal loans again, but if you’ve filed for Chapter 13 bankruptcy, you need to pay back your creditors in full before applying for them.
2 Types of Personal Loans
When applying for a personal loan after bankruptcy, you need to get more information about available options:
– Secured. Lenders require some property (called collateral) with a real value, which can be your real estate, cars, bonds, stocks and others.
This means you’ll pledge it against your loan, so that it can be sold to cover the costs of your lender if you fail to pay back your debt.
The good news is that secured personal loans have lower interest rates and increased amounts.
– Unsecured. No collateral required, and you provide lending companies with only one security: your signature and promise to pay back.
It’s harder to get this loan type because of increased risks for lenders, and that’s why they come with higher interest rates and shorter repayment periods.
Steps When Applying for a Loan
- Secured vs. unsecured. Consider the above-mentioned information to choose the right type based on your circumstances and finances.
- Repayment and amount. Set up a realistic budget and stick to it, as that’s what will help you determine how fast you can pay off a new loan and how much money you need. Don’t forget one basic rule: the faster you pay back, the lower your costs are. Some people borrow small amounts when applying for a personal loan after bankruptcy to improve their credit ratings.
- Shop around. Once you determine the type of a loan you want to get, its amount and repayment period, look for lending companies willing to provide funds to clients with bankruptcy cases in the past. Check their requirements and qualifications to make sure that you fit them and apply to at least a few lenders to get the lowest interest rates and affordable terms.
Tips to Get Approved
Do you want to get a personal loan after bankruptcy? Increase your chances to get approved by following a few helpful guidelines, such as proving potential lenders that you are creditworthy again.
– Verify your credit score and find out if local lending companies provide loan services to ex-bankruptcy filers. What are their minimum credit ratings to get qualified?
– Manage and minimize existing debts, otherwise, you’ll only leave a bad impression on banks, thus lowering your chances to get a loan.
– Restore your credit history by paying existing bills and meeting other debt obligations on time.