Rebuilding Your Credit with a OneMain Loan After Chapter 7 Bankruptcy

Filing for Chapter 7 bankruptcy can provide much-needed relief from overwhelming debt, but it also damages your credit significantly. A Chapter 7 bankruptcy remains on your credit report for 10 years During that time, you’ll likely face higher interest rates, deposits, and difficulty getting approved for loans and credit cards.

While patience and responsible use of secured credit cards can eventually help rebuild your credit, taking out an installment loan with a company like OneMain Financial soon after your bankruptcy discharge can accelerate the process. Here’s what to know about OneMain loans after Chapter 7 bankruptcy

What is OneMain Financial?

OneMain Financial is a personal loan company that offers loans from $1,500 to $20,000 for borrowers with fair to poor credit. They have over 1,500 branch locations across 44 states and can fund loans quickly. In addition to their personal loan products, OneMain offers secured loans, lines of credit, and car loans.

OneMain caters to borrowers with less-than-perfect credit by considering factors beyond your credit scores when approving loans. They look at your income, existing debt, and credit history to make lending decisions. Interest rates for OneMain loans typically range from 18% to 36% APR.

When Should You Take Out a OneMain Loan After Bankruptcy?

Most experts recommend waiting at least 6 months after your Chapter 7 discharge before applying for a OneMain loan or other new credit. Waiting longer, up to a year, allows your credit scores to start recovering and shows lenders you can manage your finances responsibly after bankruptcy.

It also gives negative information time to start aging and hurting your credit scores less. However, an installment loan can help rebuild credit faster than waiting alone. It shows you can manage a fixed monthly payment responsibility.

OneMain will likely approve your loan application before a traditional bank would after bankruptcy. While their interest rates are higher, OneMain provides an opportunity to demonstrate you can handle credit post-bankruptcy.

OneMain Loan Requirements After Chapter 7

To qualify for a OneMain loan soon after Chapter 7 bankruptcy, you’ll need:

• Monthly income over $1,500. OneMain requires sufficient income to make the loan payments. They may ask for pay stubs, tax returns, or bank statements to verify income. Self-employed applicants can provide 1099s and business financial statements.

• Government-issued photo ID. You’ll need a driver’s license, state ID, passport, or military ID.

• Social Security number. This allows OneMain to check your credit history and bankruptcy filing.

• Active checking account. The loan funds will be deposited into your checking account if approved, and that’s where automated payments will pull from each month.

Your credit scores likely took a hit after your bankruptcy, but that alone won’t disqualify you from a OneMain loan. They may approve you based on your income and other factors despite low scores. However, the lower your scores, the higher your interest rate is likely to be.

How OneMain Loans Help Rebuild Credit

An installment loan like OneMain’s can rebuild your credit in several ways after bankruptcy:

• Payment history – Making consistent, on-time payments shows lenders you can manage credit responsibly. Payment history is the most important factor in your credit scores.

• Credit mix – Installment loans add to the mix of accounts on your credit reports. Diversity of accounts signals you can manage different types of credit.

• Lower utilization – The loan provides an account with a fixed balance you’re paying down each month. This lowers your overall credit utilization compared to no installment accounts.

• Credit history – The new loan lengthens your credit history, offsetting the bankruptcy’s damage to your history length.

Just be sure to borrow only what you need and can realistically repay on a OneMain loan. Paying extra each month helps pay off the loan faster, saving on interest charges.

Alternatives to Rebuild Credit After Bankruptcy

While OneMain loans can help start rebuilding credit post-bankruptcy, they aren’t your only option:

• Secured credit cards – These require a refundable security deposit and report to the major credit bureaus. Making small purchases monthly and paying off the balance in full can establish positive payment history.

• Credit builder loans – Offered by credit unions, these loans place the amount borrowed into a savings account. You repay the loan monthly to build payment history. The money is yours plus interest after successfully repaying the loan.

• Become an authorized user – Ask a family member or friend with good credit to add you as an authorized user on their credit card. Their on-time payments will be reflected in your credit reports.

• Retail store cards – Department store cards tend to be easier to get after bankruptcy than major unsecured cards. Managing a small store card helps demonstrate creditworthiness.

• Secured cards from your bank – Many banks now offer secured cards to customers who don’t qualify for their unsecured cards yet. These help establish a relationship and history with the bank.

The right option for starting to rebuild credit after Chapter 7 depends on your situation. Using a combination of responsible credit-building methods over time provides the best chance to recover from bankruptcy and improve your credit.

Getting Approved for a OneMain Loan

Here are some tips for getting approved for a OneMain personal loan soon after Chapter 7 bankruptcy:

• Apply about 6 to 12 months after your discharge to allow your credit to start improving. Waiting longer if possible can result in a lower interest rate.

• Only borrow what you need. Accepting the maximum loan amount will make it harder to manage the payments on your limited post-bankruptcy budget.

• Have steady income from employment or other sources. The required monthly loan payments need to fit into your regular budget.

• Pay down other debts first if possible. Less existing debt obligations improve your debt-to-income ratio.

• Open checking and savings accounts if needed. Lenders like to see you have established accounts.

• Consider adding a co-signer if offered. A co-signer with better credit may help you qualify and get a lower interest rate. Just be sure they understand the obligation.

• Build savings to cover emergencies and gaps in income. Having reserves makes it easier to prioritize the loan payments.

• Make payments on time every month once approved. Set up autopay through your checking account to avoid missed payments and credit damage. Pay extra when possible.

With a prudent loan amount, steady income, and responsible use of the account, a OneMain loan can help rebuild credit without taking on too much debt soon after bankruptcy. Be patient and continue practicing good credit behaviors, and your scores can steadily improve over time.

Frequently Asked Questions About OneMain Loans After Chapter 7

Here are answers to some common questions about getting a OneMain personal loan after Chapter 7 bankruptcy:

How long after Chapter 7 bankruptcy can I get approved for a OneMain loan?

OneMain may approve a loan just 1-2 months after discharge, but waiting at least 6 months allows your credit to start recovering and shows lenders you can manage finances responsibly after bankruptcy.

Can I get a OneMain loan during Chapter 7 bankruptcy?

No, you cannot take out a OneMain personal loan or other new credit until after your bankruptcy discharge. Doing so could result in your case being dismissed or penalties from the lender.

Will a OneMain loan help build my credit?

Yes, responsibly using a OneMain installment loan can help rebuild credit after bankruptcy by adding positive payment history, lowering credit utilization, and increasing the credit mix on your reports.

Are the interest rates higher on OneMain loans after bankruptcy?

Yes, interest rates on OneMain loans will generally be higher after a recent bankruptcy. However, their rates for borrowers with poor credit are competitive. Improving your credit first may result in a lower rate.

Can I get a OneMain loan if I had one before bankruptcy?

Yes, you can get approved for another OneMain loan after bankruptcy if you meet the income and other requirements. Your previous OneMain loan that was discharged shouldn’t directly impact your new application.

Is a OneMain loan better than a payday loan after bankruptcy?

Yes, a OneMain installment loan is generally much better and more affordable than a payday loan. OneMain offers fixed monthly payments and longer terms, while payday loans have balloon payments and very high APRs exceeding 400%.

Should I accept the maximum loan amount OneMain approves me for?

No, it’s best to only accept the amount you actually need. Getting the maximum loan soon after bankruptcy can be difficult to manage on a limited budget. Accept a prudent amount you know you can repay on time each month.

How quickly does OneMain fund approved loans?

OneMain provides fast access to funds, often as soon as the next business day after loan approval. Once you complete paperwork, the loan amount is deposited directly into your checking account the next day in most cases.

The Bottom Line

A OneMain loan can provide access to needed funds after Chapter 7 bankruptcy when traditional lenders likely won’t approve you yet. While the high interest rates aren’t ideal, responsibly using a OneMain installment loan soon after discharge can begin rebuilding