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You might believe that a payday loan is your only option following bankruptcy, but there are a number of respectable alternatives to payday loans for bankrupts. Finding a lender that provides personal loans to people with bad credit or a history of bankruptcy is now simpler than ever thanks to advancements in banking technology.
Here are the top bankruptcy loan options if you want to start rebuilding your credit and getting back on your feet after bankruptcy.
Can you qualify for a personal loan after bankruptcy?
When someone declares bankruptcy, their credit score plummets. Due to this, it is very challenging to be approved for most types of financing.
The majority of traditional lenders, such as banks and credit unions, won’t accept unsecured loan applications from people with poor credit or negative marks (ex. bankruptcy or accounts in collections) on their credit report. After all, lenders typically have minimal eligibility standards for the loans they offer, like:
Bankruptcy-friendly lenders typically impose unfavorable conditions on their loan products, such as higher interest rates and other fees that other customers don’t have. Because of this, many people who file for bankruptcy eventually turn to predatory lenders who charge exorbitant rates for high-interest payday and installment loans.
Still, it isn’t all doom and gloom.
There are trustworthy lenders prepared to cooperate with borrowers with less-than-perfect credit histories. In addition to the consumer’s credit score and bankruptcy history, these lenders will take other factors into account when making their decision. These factors include:
Time plays a significant role in determining a person’s eligibility for a personal loan or other loan product. Someone who had their bankruptcy discharged or dismissed years ago, for instance, will have a better chance of being approved for a personal loan than someone who still has an active bankruptcy case.
Finding a lender with reasonable rates is typically easier the longer it has been since filing for bankruptcy. This is particularly valid for those who have actively worked to enhance their credit and financial situation since filing.
Best personal loans for discharged bankrupts (that aren’t payday loans)
A bankruptcy that has been discharged by the court absolves the debtor of all obligations related to the bankruptcy case. With this freedom, they can once more pursue various forms of financing.
Here are the top seven personal loan providers and marketplaces to take into account before you turn to payday loans for bankrupts.
MoneyMutual is a free online marketplace that connects prospective borrowers with credible lenders for financing. To use this marketplace, simply complete the secure, online application and wait to be connected with potential lenders.
Things to consider:
BillsHappen is another online marketplace that matches borrowers with the best lenders for their circumstances. This marketplace boasts a hassle-free experience, easy application, and fast funding.
Things to consider:
CashUSA is one of the largest online lending networks for consumers with bad credit or a discharged bankruptcy. This platform has successfully matched thousands of consumers with lenders to help them secure financing in the form of short-term loans and personal loans.
Things to consider:
Like most of the options on this list, BadCreditLoans is a free, online marketplace. Most of the lenders in the network are reputable, licensed, and offer personal loans to borrowers with bad credit and delinquencies on their credit report.
Things to consider:
A major lender network, PersonalLoans works with borrowers with bad credit, a history of bankruptcy, foreclosure, and accounts in collections.
Things to consider:
Established in 1998, CreditLoan is a free-to-use online platform that matches borrowers with lenders based on their individual situations. CreditLoan also offers other resources and strives to improve people’s financial education and help them achieve long-term financial sustainability and freedom.
Things to consider:
Founded in 1997, CashAdvance is a well-established, large network of lenders that offer short-term loans to people with a recently discharged bankruptcy or poor credit.
Things to consider:
Other options if you’ve been rejected
Don’t immediately turn to payday loans for bankrupts if you’ve been denied a personal loan. More than 90% of people who take out payday loans regret doing so in the end. Here are some different strategies to improve your credit and raise your chances of becoming approved for a personal loan in the future instead.
Dave and Albert, two cash advance apps, provide small, short-term loans without charging interest. The advances are then repaid from your next paycheck. They don’t demand a credit check, making them a good option for borrowers who had to file for bankruptcy but require some urgent cash.
For example, Albert offers up to $250 until your next payday, and if you sign up now, they’re offering a $150 bonus to new users who complete certain requirements.
One type of reverse loan for people who need to establish or repair their credit is called a credit-builder loan. In contrast to a traditional loan, the borrower does not get the full amount up front. Instead, while the borrower makes monthly payments on it, the lender keeps the money in a secure account. Because of this, there isn’t usually a credit check.
The lender will notify the credit bureaus of the borrower’s activity as long as they adhere to a predetermined payment schedule, helping them establish credit. The money is given to the borrower to use as they see fit after the lender receives full repayment of the loan balance (including any interest) from the borrower.
Many banks, credit unions, and online lenders offer credit-builder loans. Before choosing a lender, consider the following:
Consider checking out these lenders if you’re considering obtaining a credit-building loan:
Self Financial, Inc. offers credit-builder loans and secured credit cards to people who need help building their credit. These loans range from around $500 to $1,500 with an average APR of 15.65%. Loan terms range from 12 to 24 months. Downside: Self charges a one-time fee to open an account.
This lender offers an array of options to help consumers build their credit, especially after a bankruptcy. Loan amounts through Credit Strong vary, but the maximum loan term is five years. APR ranges from 5.85% to 14.89%. Downside: There is a one-time administrative fee and a monthly fee of $15 or $30.
With a maximum APR of 29 percent, MoneyLion’s mobile banking app also provides credit-builder loans (“Credit Builder Plus Loans”) up to $1,000. 99%. Downside: There is a monthly membership fee.
Check out this video if you’re curious about credit-builder loans and want to learn more:
Even after bankruptcy, a secured loan is a different way for borrowers to rebuild their credit.
With a secured loan, the borrower is required to put up security that is at least as much as the loan’s principal amount. But if the borrower misses a payment, the lender may seize the collateral to make up the difference.
A secured loan is a good way to establish credit or raise your credit score if you need to. Reputable lenders will notify credit bureaus of any loan-related payment activity, assisting in credit building. Secured loans also have lower interest rates than traditional loans.
There are numerous reputable lenders that provide secured loans, but these are two of the best.
An online lender, OneMain Financial works primarily with bad-credit consumers. It doesn’t require a credit score, though it does come with higher interest rates (18.00% to 35.99%) than other lenders. OneMain Financial offers secured loans ranging from $1,500 to $20,000 with 2 to 5-year terms. Downside: The origination fee ranges from 1% to 10%.
Upgrade offers secured loans and joint loans to borrowers with a 560+ credit score. The APR on secured loans ranges from 7.96% to 35.47%. Loans start at $1,000 and go up to $50,000 with 2 to 7-year terms. Individuals with a higher credit score may use their vehicle as collateral for a better rate. Downside: The origination fee ranges from 2.9% to 8%.
With a secured credit card, the borrower deposits some kind of security, typically cash, in exchange for a line of credit. This amount is usually between $300 and $2,500.
The account owner may use the secured credit card as they would any other credit card once the funds are in the account. To aid the consumer in establishing credit, any activity on the account is reported to the credit bureaus.
Some banks and online lenders give customers the choice to switch from a secured credit card to an unsecured credit card in exchange for a higher credit limit. If the card has a balance at the end of the month in either scenario, interest will be charged.
Here are two highly-rated options for secured credit cards:
If you already have an established credit-builder account in good standing with Self, then you may automatically qualify for a secured credit card. Self’s secured credit cards have a variable APR of 23.74% variable APR and a minimum $100 deposit. Downside: $25 annual fee.
OpenSky offers secured credit cards ranging from $200 to $3,000 to borrowers with poor or no credit. The average APR is 17.39%. Downside: $35 annual fee.
Individual consumers can obtain loans through peer-to-peer (P2P) lending without the assistance of a third-party financial institution. For those who might not be qualified for conventional loan products but still need to establish credit or find funding, peer-to-peer lending is a good alternative.
Since each provider sets their own loan rates and terms, P2P platforms and websites have different loan terms and rates. However, these rates are typically more affordable than those of other payday loans or short-term loans for insolvent borrowers.
P2P lending is available on a number of online platforms, including Upstart, Peerform, and Lending Club. The r/borrow subreddit also provides peer-to-peer lending for those who favor a more individualized experience.
Add a cosigner or guarantor
If you are unable to obtain a personal loan or other loan product on your own, your chances of success with a cosigner or guarantor may be improved. This is so that the lender has some assurance that you will pay back what you owe.
What’s the difference? A cosigner would be accountable for repayment for the entire term of the loan. If you don’t pay, a guarantor will be responsible for the entire sum.
Anyone can cosign a loan, but the higher the cosigner’s credit score, the better the loan’s rates. The cosigner’s credit should ideally be good or excellent (670 and up).
A guarantor must be a U. S. citizen, over the age of 21, with good credit and a track record of financial stability It also helps if the guarantor is a homeowner.
What is a payday loan?
Payday loans are small sums of money provided to the borrower immediately. The borrower is required to pay back the short-term loan in full at once, typically before their next payday. Payday loans are frequently easy to qualify for because they have few requirements and don’t check the borrower’s credit.
Although there are about 23,000 payday lenders in the country, some states have outlawed the practice. There are some good reasons for this. Payday loans are risky and have a number of issues.
One factor is that they have triple-digit interest rates, which are extremely high. Another is that their terms of repayment are incredibly brief (typically two to four weeks). These factors explain why many borrowers of payday loans are unable to make timely repayments.
As a result, they are forced to obtain a second payday loan in order to settle the first However, because each new loan carries its own set of fees, it becomes more difficult to repay each new loan. Payday loan borrowers typically require ten loans before they are able to pay off their debt. This is the “payday debt trap” and the “payday lending business model,” respectively.
What’s the difference between Chapter 7 and Chapter 13 bankruptcy?
In order to fully understand your options before deciding whether to file for bankruptcy, you should speak with a nonprofit credit counselor and a bankruptcy lawyer (most offices provide initial consultations for no cost). The decisions you make could have a 10-year impact on your credit. It can also get expensive.
However, Chapter 7 and Chapter 13 are typically the two filing options. There are a few key differences.
A Chapter 7 bankruptcy discharges almost all consumer debt and provides a fresh start for the debtor. But if you file for Chapter 7, you might lose some of your assets, like your house or your car if you have a title loan. For up to 10 years, this type of bankruptcy is recorded on a person’s credit report.
On the other hand, existing debt may not be completely discharged in a Chapter 13 bankruptcy. Instead, they must adhere to a 3- to 5-year repayment schedule and pay back their creditors. The remaining debt is paid off and the bankruptcy is discharged after this time period. For up to 7 years, Chapter 13 remains on your credit report. Unless the unsecured debt falls into the priority debt category, most Chapter 13 filers won’t pay much toward unsecured debt, such as credit card balances, medical bills, and personal loans. (For example, child support or IRS obligations. In those circumstances, you’ll pay the full sum.
No matter the kind of bankruptcy, it can be very challenging to be approved for any loan product. However, if a person has filed for Chapter 13 and has followed their repayment plan, some lenders are more willing to work with them.
How long do I have to wait after bankruptcy proceedings to get a loan?
To qualify for the majority of conventional loans after filing for Chapter 7, you must wait at least four years after the court dismisses or discharges the bankruptcy. Even so, if the bankruptcy is still reflected on your credit report when a lender conducts a hard or soft inquiry, many of them will reject your application.
The wait time also depends on the type of loan. For instance, it might be possible to obtain a credit card soon after filing for bankruptcy. This gives lenders more assurance that you’ll pay them back because you can’t file for bankruptcy again for at least a few years after the prior one is discharged.
You might be able to obtain an auto loan from a subprime lender shortly after declaring bankruptcy if you’re trying to do so. But these loans frequently have unfavorable conditions and high interest rates.
Finally, depending on the lender and the type of bankruptcy, you might be able to obtain a mortgage loan. Some lenders covered by the FHA will work with borrowers even as they complete their Chapter 13 repayment plan. Additionally, these lenders may offer loans as soon as two years following a Chapter 7 filing.
However, you might have to wait at least four years for a conventional mortgage loan following the bankruptcy’s full discharge or dismissal.
In the end, there are numerous options to payday loans for bankrupts, including personal loans. Consider getting a secured credit card, secured loan, or getting a cosigner for better rates if you don’t currently qualify for a personal loan or if the terms are too restrictive. Additionally, this will assist you in repairing your credit so that you can obtain financing in the future.
Yes, but it’s possible that you’ll have to wait a while after the bankruptcy has been discharged. In the event that you require a mortgage sooner, you might be qualified for an FHA-backed mortgage loan as soon as two years following bankruptcy.
Even though most lenders won’t let you get an auto loan, there are some subprime lenders who might be open to working with you. However, these lenders typically come with higher fees.
This is dependent on a number of variables, including the bankruptcy type, your credit score before filing, and your debt-to-income ratio. If you had good or excellent credit before filing, there will likely be a significant decline. The change might not be as significant, though, if your credit score was already low. On the plus side, declaring bankruptcy may actually hasten the process of rebuilding your credit if you have numerous accounts in collections, bad credit, and excessive debt. This is due to the fact that bankruptcy eventually reduces your DTI ratio and eliminates past-due accounts that are harming your credit.
By declaring bankruptcy, student loan debt may be discharged. It is, however, frequently quite challenging because you have to convince the judge that paying back the student loans will put an “undue hardship” on you and your family. The court’s discretion and your particular case will determine whether or not the bankruptcy discharges your student loan debt.
Yes, but after the bankruptcy is discharged, be prepared for a waiting period. Certain loans, like secured personal loans, subprime auto loans, and mortgage loans with FHA insurance, might be simpler to obtain than others.
Can you borrow money after bankruptcies?
After filing for bankruptcy, it is still possible to be approved for a personal loan, but you might not be eligible for the best interest rates. But as you work to repair your credit, your options might get better over time.
How long do I have to wait to get a personal loan after Chapter 7?
For Chapter 7, up to 10 years after the filing. For Chapter 13, up to seven years. However, declaring bankruptcy does not preclude you from ever receiving loan approval. Your credit scores can increase if, among other things, you adhere to your repayment plan or have your debts forgiven.
Will affirm approve me with bankruptcies?
Each time a customer applies for a loan through the business, Affirm also assesses their creditworthiness. A typical consumer bankruptcy situation will typically result in the discharge of any debt you owe to Affirm.