The process of applying for a personal loan can be challenging, particularly if you have problems paying off debt after bankruptcy. A bankruptcy may negatively impact your borrowing prospects, but that does not mean that you will never be approved again.
In this article, we have included some helpful information on how to get a personal loan after bankruptcy as well as things to be aware of while applying for loans. Furthermore, continue reading to learn how to avoid the risks associated with filing for a loan when you have a low credit score and a history of bankruptcy.
Can I Get a Personal Loan after Bankruptcy
It is indeed possible to get a personal loan after filing for bankruptcy, but it might not be simple, and expect high borrowing rates. Additionally, lenders will have no trust that you will repay the loan since they consider you a riskier borrower. For this reason, they will charge higher interest rates and origination costs.
To get the loan approval, they can even ask that you put up collateral. Moreover, every lender has different qualifying standards, which may include a minimum income and credit score. Also, you have to fulfill those requirements to get a personal loan after bankruptcy. Furthermore, if you have taken action to repair your credit, a high income and a low debt-to-income ratio (DTI) may be compensating factors.
Types of Bankruptcy
The kinds of bankruptcy you file depend on your eligibility for a personal loan. In addition, the duration of your bankruptcy will negatively affect your credit. There are two major types of bankruptcy, which include:
Chapter 7
This kind of bankruptcy includes the liquidation of assets that can be used to satisfy unpaid obligations. Additionally, filers may be permitted to preserve some personal property and real estate based on their assets and the applicable state and federal rules.
Furthermore, bankruptcy usually does not allow the discharge of some debts, such as unpaid taxes, student loans, alimony, and child support obligations. For a maximum of ten years, Chapter 7 bankruptcy remains on your credit record.
Chapter 13
Most of the time, a person filing for Chapter 13 bankruptcy can keep their personal belongings. Also, they must have a steady source of income and agree to a payment plan that repays their creditors. Throughout the procedure, the debtor’s budget and payment plan are approved by the court system.
Furthermore, a court trustee should assist in supervising the repayment of outstanding debts from beginning to end. After filing, Chapter 13 bankruptcy remains on credit records for seven years.
How to Get a Personal Loan After Bankruptcy
If you require a personal loan after bankruptcy, there are several crucial steps you should be aware of. You should spend some time building your credit if you are unable to obtain the cash and need to wait a while before applying.
Moreover, when you are prepared to proceed with a personal loan, you must follow the following procedures:
Prequalify for a personal loan
Establish your prequalification for a personal loan so that you may evaluate possible offers from different lenders. Additionally, you will be given an anticipated annual percentage rate (APR), which is a more accurate estimate than interest rates as it takes into consideration any possible lender costs. Make sure each lender does not charge an origination fee.
Determine your loan amount.
It’s crucial to determine how much you need to borrow before applying for a personal loan. Moreover, to calculate how much your monthly loan payments will be, you are advised to utilize a personal loan calculator.
Shop around
Similar to borrowers, lenders also vary. Examine minimum and maximum loan amounts, eligibility conditions, annual percentage rates, terms of repayment, fees, and customer ratings when researching personal loans and lenders.
Apply for a personal loan
After locating a lender, submit an online or in-person application. You will be required to give certain details to the lender, including your Social Security number (SSN), residence, and income. Also, if you want to apply in person, give us a call in advance to find out what paperwork is needed to confirm your residency or income.
Apply with a co-signer
In comparison to applying alone, applying for a personal loan with a cosigner may increase your chances of acceptance and result in cheaper interest rates. Just remember that if you don’t pay back the debt, your cosigner will be held legally accountable. For example, your cosigner’s credit score would suffer if you skipped a monthly payment.
Check and sign the loan contract
If the loan request is approved by your lender, you will get a loan contract to check and verify. In addition, once you have signed the loan contract, you will get your money.
Lastly, you can pay back your loan in predetermined installments each month. Enrolling in autopay might result in rate savings from certain lenders. Furthermore, autopay will guarantee that you do not miss a due date, improving your credit score in the process.
Final Thoughts
Getting a personal loan after bankruptcy is possible, but it requires modifying credit, keeping up steady pay, and being genuine about financial history. Lenders review applications closely, so tolerance and capable behavior are key. With time and effort, you can modify financial stability and get to vital advances.