Getting a loan after declaring bankruptcy is not impossible, but it is just more difficult. After all, bankruptcy is a large black mark on a person’s credit report. It is important to understand, though, that there is life after filing bankruptcy and part of that life involves being able to be approved for a
Before getting a loan after bankruptcy, ask yourself this: is a loan something that you really want to get? After all, your credit will be harder to repair if you take a loan out too soon after bankruptcy has been declared. You will also have to pay a much higher interest rate on this loan than you would have paid if you could have waited until your credit looked better to get the loan. The high interest rates mean that you won’t be able to borrow very much and even then your loan period won’t be very long.
If you have thought about these things and still think that a loan is right for you, then keep reading because getting a loan after bankruptcy is possible. It just takes some patience and perseverance. Keep these figures in mind: If you filed for Chapter Seven, you must wait for two years after filing your bankruptcy to apply for a loan. If you filed Chapter Thirteen, you must pay your creditors in full before a loan can be applied for. Generally speaking, these are the only two types of filings that can be done when filing a personal bankruptcy.
The best way to get approved for a loan after bankruptcy is to work hard and prove to lenders that you are no longer a credit risk. The best way to do this is to pay all of the bills you have left on time and to responsibly maintain a credit card. After you have at least a year of on-time payments to your utilities and credit card, you can ask these companies for reference letters to prove to potential lenders that you have learned how to be financially responsible. Another plus to waiting a year, is that by paying your bills on time for a year, your credit rating will raise considerably.
Keep in mind that the loan approval process is linked in large part to the amount of risk that the lender thinks he will have by loaning you money. If the risk is determined to be larger, the interest rate goes up and the term goes down. The fact that you have a bankruptcy on your credit report puts you in the higher risk category.
Many people who have declared bankruptcy feel ashamed of their situations, but there is no reason to feel this way. Obviously you didn’t make the decision to do this on a whim. For many people bankruptcy is the last possible option they can think of as a way out of their financial situation, and it should be looked at as a chance to start over. Yes, it puts a big black mark on your credit record. But your credit record is not permanent. It recycles itself almost continually and bankruptcies will eventually come off of that report. In fact, people who maintain a good credit standing for one and a half to two years after declaring bankruptcy can sometimes qualify for loans at the same interest rates they qualified for before their bankruptcy declaration.
Don’t lose faith, you will be able to get your finances in order and you will be able to find a loan after bankruptcy. It just takes time and patience, and the effort to dig a little deeper to find the lenders who specialize in these types of loans.