Filing for bankruptcy can impact your finances in myriad ways, including your ability to get a credit card or a loan. Still, it may be possible to secure a personal loan after bankruptcy if you’re flexible with your lender and willing to pay higher interest rates and loan fees. You may also be able to secure the financing you need if you’re able to find a co-signer who is willing to put their own credit on the line to help you out.
Read on to learn where to find personal loans after bankruptcy and steps you can take to apply once you’re ready.
- Both of the two primary kinds of bankruptcies, Chapter 7 and Chapter 13, will remain on your credit report for several years after filing.
- A co-signer can increase your likelihood of being approved for a personal loan and potentially securing a lower interest rate, but this requires your co-signer to put their own credit score at risk.
- Outside of personal loans, additional funding options available to you after filing for bankruptcy include 401(k) loans, home equity loans, and credit cards.
The Difference Between Filing Chapter 7 and Chapter 13
The type of bankruptcy you filed can play a role in your ability to qualify for a personal loan, in addition to how long your bankruptcy will continue impacting your credit.
This type of bankruptcy involves the liquidation of assets that can be used to settle unpaid debts, although filers may be able to keep some personal property and real estate depending on the assets they have as well as state and federal laws that apply. Also note that some types of debt, including owed child support, most student loans, tax debts, and alimony, typically cannot be discharged during bankruptcy.
Chapter 13 bankruptcy typically allows the filer to keep their personal property, but they must have regular income and agree to a payment plan that pays off their creditors over time. The court system approves the debtor’s payment plan and budget during the process, and a court trustee helps oversee the repayment of unpaid debts from start to finish.
Chapter 13 bankruptcy stays on credit reports for seven years after the filing date.
Where to Find a Personal Loan After Bankruptcy
Because both of the main types of bankruptcy are listed on credit reports for years after the filing date, going through a bankruptcy can make it difficult to get an auto loan, a mortgage, a credit card, or other types of financing. However, some personal loan companies offer borrowing options that can make post-bankruptcy borrowing a reality.
|Loan Amounts||Interest Rates||Repayment Terms||Minimum Credit Score|
|Avant||$2,000 to $35,000||9.95% to 35.99%||12 to 60 months||600|
|LendingClub||$1,000 to $40,000||9.57% to 35.99%||24 to 60 months||Not disclosed|
|OneMain Financial||$1,500 to $20,000||18.00% to 35.99%||24 to 60 months||None|
|Upgrade||$1,000 to $50,000||8.49% to 35.99%||24 to 84 months||Not disclosed|
|Upstart||$1,000 to $50,000||5.2% to 35.99%||36 or 60 months||300|
How to Secure Your First Personal Loan After Bankruptcy
If you need to borrow money after bankruptcy, there are a range of important steps that you’ll want to take. Also be aware that, if you can’t quite get approved for the funding you need, you can spend some time improving your credit and waiting things out before you apply.
Once you’re ready to move forward with a personal loan, you’ll need to make the following moves.
See If You Can Get a Co-signer
Before you apply for a personal loan on your own, see if you have a trusted family member, partner, or friend with good credit who is willing to be the co-signer on the loan. Having another person willing to co-sign can help you get a loan with considerably better personal loan interest rates and terms overall, and this can help you save money on interest and fees.
Note, however, that the co-signer on your loan is legally responsible for repayment if you fail to meet your responsibilities. A late payment on a personal loan with a co-signer can also damage both parties’ credit scores, so this should be avoided at all costs.
Many online lenders let you pre-qualify or “check your rate” online without a hard inquiry on your credit reports. This step can help you figure out the rates and fees you would probably have to pay for a personal loan. It’s also a great way to gauge your approval odds before you apply.
Generally speaking, you can pre-qualify for a personal loan online by supplying your:
- Full name
- Contact information
- Social Security number’s (SSN’s) last four digits
Create a Budget
Once you have pre-qualified for a personal loan and have an idea of what your monthly payment would be, it makes sense to sit down with your bank statements and other bills to see what you can truly afford.
Ideally, you’ll have enough income to cover all your regular expenses and discretionary spending categories like food and entertainment. In the meantime, you’ll need to have money left over to cover your new personal loan payment while still having extra cash each month for savings.
Next, you’ll want to gather the documents you’ll need for your personal loan application. Items and information you ought to secure for this purpose can include your SSN, annual income, employment, pay stubs, driver’s license, and potentially your tax returns.
The information that lenders need from you for the loan process can vary depending on how easily they can verify your identity and income, as well as how long it has been since your bankruptcy filing. Either way, you’ll want to gather all the documents you could potentially need and be willing to send in further documentation and information during the process if the lender requires it.
Apply for a Personal Loan
Applying for a personal loan online can be a breeze, and that’s particularly true when you’ve gathered the information required well ahead of time. As you move through the application process, you’ll want to answer all questions as thoroughly and honestly as you can.
Make sure to list the true reason for the loan, and be honest and forthcoming about your income and employment situation. Many lenders are able to reach a decision on personal loans within a few hours, whereas others may take a few business days.
Sign Loan Agreement
Once you’ve been approved for a personal loan that suits your needs and goals, you can sign the loan agreement online and from the comfort of your home. From there, you will typically receive funding via an Automated Clearing House (ACH) transfer in your bank account within a few business days.
After that, you should prepare to make on-time payments on your loan every month with the goal of improving your credit score and financial health over time.
Personal Loan Alternatives After Bankruptcy
As you consider loan options after bankruptcy, you should know about the alternatives that could also help you get the financing you need.
- 401(k) loan: A 401(k) loan lets you borrow against your retirement plan and then pay yourself back, plus interest. However, not all program administrators allow 401(k) loans, and your plan may require you to immediately repay the loan in full if you leave your job.
- Home equity loan: If you have considerable home equity and a steady income, you may be able to borrow against the value of your home with a home equity loan.
- Credit card: Secured credit cards and other credit cards for bad credit can give you a line of credit to borrow against when you need to, all while helping you build your credit score along the way. That said, secured credit cards do require you to put down a cash deposit as collateral.
Which Lenders Offer Personal Loans After Bankruptcy?
What Fees Can Personal Loans Charge?
Can a Co-signer Help Me Get a Personal Loan After Bankruptcy?
A co-signer with good credit can help you get approved for a loan. Having a co-signer can also dramatically improve the interest rate and loan terms you can qualify for.
The Bottom Line
Getting a personal loan after bankruptcy can be difficult and expensive. However, there are times when you need to borrow money regardless of the long-term costs. Your best bet when seeking a loan after bankruptcy is making sure you only borrow what you need and paying the money back as quickly as you can.
Also, make sure that you make every payment early or on time, and that you use the opportunity to learn positive financial habits to help you avoid financial problems in the future.
United States Courts. “Chapter 7—Bankruptcy Basics.”
United States Bankruptcy Court, Eastern District of Missouri. “Chapter 7 vs. Chapter 13 Bankruptcy.”
United States Courts. “Chapter 13—Bankruptcy Basics.”
Avant. “Pursue Your Goals with a Personal Loan.”
Avant Support. “What Is the Typical Credit Score of an Avant Customer?”
LendingClub. “Competitive Fixed Rates and Monthly Payments.”
OneMain Financial. “Personal Loans.”
Upgrade. “Personal Loans.”
Upstart. “A Personal Loan for Your Personal Needs.”
Upstart Support. “What Are the Minimum Credit Requirements to Receive a Loan?”
Consumer Financial Protection Bureau, via Internet Archive. “What Is a Co-signer?”
Internal Revenue Service. “Considering a Loan from Your 401(k) Plan?”
Upstart Support. “What Fees Am I Charged?”