Getting a Personal Loan After Bankruptcy

Underwriter writing personal loan and stamping approved.The dreaded word bankruptcy. This term has carried a negative connotation with it for some time, but the truth is many people file for bankruptcy. Financial hardships are just a part of life. As of September 30th, 2022, a total of 383,810 bankruptcies were filed over the last twelve-month period, so don’t think you’re alone in this if you’ve had to make this difficult financial choice. There is a life to be had after bankruptcy if you manage to fix the mistakes of the past.

Bankruptcy Can Feel Like a Fresh Financial Start

You can think of bankruptcy as a fresh start. Yes, things will be more difficult for some time, but you can use this time to build healthy personal finance habits. As you may already know, bankruptcy will show up as a black mark on your credit report and can stay there for up to a decade.

Companies that see an applicant with a previous bankruptcy will be far less likely to do business with that applicant, especially if the bankruptcy is relatively recent. If they decide to do business with you, it often comes with strings attached, such as very high interest rates or the need for a well-qualified cosigner.

Rebuilding Your Credit After Bankruptcy

Rebuilding your credit after bankruptcy is a bit of a catch-22. You absolutely must rebuild your credit to fix the damage from the bankruptcy. At the same time, the bankruptcy itself makes building credit extremely difficult. However, it’s not impossible. Before embarking on your credit-rebuilding journey, make sure your other finances are in order.

Make sure you stay up to date with any bankruptcy payments you still have to make if any. If you have a mortgage, keep paying that bill on time each month, along with any other obligations you have. That’s the first step to building your credit.

Get a Secured Credit Card to Rebuild Credit Quickly

You should also consider applying for a secured credit card. These credit cards function as normal cards, but come with no added frills. They are mostly for rebuilding credit.

Before even thinking of a personal loan, you’ll probably need a secured credit card. Companies need to know you can handle credit responsibly. It will take some time, but once you have an established history of on-time payments following your bankruptcy, your credit score will improve and companies will take you more seriously.

Generally, it takes six months to a year of consistent on-time payments towards a secured credit card before companies will even consider you for a personal loan.

Applying for Bad Credit Personal Loans

Even after you’ve partially rebuilt your credit with a secured credit card, you still may find it difficult to acquire a personal loan. At this point, you’ll want to look for a bad-credit personal loan. These are loans that are specifically made for people with no credit history or weak credit history, such as those with bankruptcies in their past.

Please note that we do not recommend you apply for payday loans. Those are not the same as bad-credit loans.

Instead, look for reputable companies that have a history of dealing with low credit score consumers. They’ll take a look at your situation and see what they can offer you. But be prepared to be rejected. If you’re approved, be prepared for higher interest rates and other factors such as required collateral.

Staying Positive After Filing Bankruptcy

Our final piece of advice for those who’ve filed for bankruptcy in the past is to remember to always stay positive. Time heals all wounds, as they say. With the right attitude and financial habits, just about anyone can rebuild their credit. Stay patient and keep looking forward.

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Posted on October 19, 2020 by in Personal Loans

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