How to Get Personal Loans After Bankruptcy

Declaring bankruptcy can be a difficult financial decision that leaves you with limited options for borrowing money. However, it is possible to get personal loans even after bankruptcy. In this comprehensive guide, I will provide tips on finding lenders willing to work with borrowers with bankruptcies on their record and securing a personal loan on favorable terms.

Overview of Personal Loans After Bankruptcy

Personal loans are installment loans that provide a lump sum of cash upfront and are repaid in fixed monthly payments over a set repayment term. They can be used for almost any purpose, from debt consolidation to financing large expenses.

Personal loans typically require a minimum credit score and stable income. However some lenders specialize in lending to borrowers with past bankruptcies. While interest rates may be higher it is possible to get an unsecured personal loan within a few years of bankruptcy.

Here are some key points on qualifying for and obtaining a personal loan after bankruptcy

• Wait at least 12 months after bankruptcy discharge before applying
• Interest rates typically range from 10% to 36%
• Amounts available range from $1,000 to $40,000
• Loan terms are usually 2 to 5 years
• Minimum credit scores vary by lender, typically 580+
• Secured loans require collateral while unsecured loans do not
• A cosigner with good credit may help you qualify and get better rates

Factors That Determine Eligibility

When you apply for a personal loan after bankruptcy. lenders will take into account

• Type of bankruptcy: Chapter 7 or Chapter 13 and how long ago it was filed
• Credit score: Most lenders require minimum credit scores of 580 to 700
• Debt-to-income ratio: Assessing your current debts and income
• Time elapsed since bankruptcy: Typically want to see at least 12 months since discharge

Borrowers with a more recent Chapter 7 bankruptcy may have a harder time qualifying than those with a Chapter 13 bankruptcy filed further in the past. However, each lender has their own specific requirements.

Those with very recent bankruptcies (filed within the past 6 to 12 months), low credit scores, and high amounts of existing debt are likely to have difficulty getting approved without the help of a creditworthy cosigner.

Where to Find Lenders Willing to Lend After Bankruptcy

Finding lenders willing to work with borrowers with bankruptcies on their records can be challenging. Here are some places to look:

• Online lenders: Lending Club, Prosper, Avant, Best Egg, Upgrade
• Banks and credit unions: Especially those you have an existing relationship with
• Mortgage lenders: May offer personal loans; try loanDepot, Guaranteed Rate
• Retail lenders: Finance companies like Best Buy, Overstock, Walmart
• Peer-to-peer lending: Websites like Upstart, Peerform, Prosper

I recommend starting with online lenders that specialize in near-prime borrowing. While credit unions offer personal loans, approval after bankruptcy may be difficult unless you have an established membership.

Beware of Predatory Lenders and Scams

It’s important to be vigilant of predatory lenders and loan scams when trying to get a personal loan after bankruptcy. Warning signs include:

• Extremely high interest rates
• Very short repayment terms
• Requires repayment in full with next paycheck
• Requests fees upfront before approving loan
• Pressures you to accept loan quickly
• No credit check performed
• Guaranteed approval promised

Steer clear of lenders engaging in practices like these, as you may end up in an even worse financial position. Do your research, compare multiple offers, and read the fine print before signing a personal loan agreement.

Tips for Qualifying for a Personal Loan After Bankruptcy

Though challenging, getting a personal loan after bankruptcy is possible if you take the right steps. Here are some tips:

• Wait at least 12 months after bankruptcy discharge before applying
• Work on rebuilding your credit – get a secured credit card, become an authorized user, or take out a credit builder loan
• Keep credit card balances low and pay all bills on time
• Pay down other existing debts to lower your debt-to-income ratio
• Build your savings – lenders like to see cash reserves
• Apply with a cosigner who has excellent credit, if possible
• Shop with lenders who offer prequalification to compare personalized rates
• Be prepared to provide recent tax returns, pay stubs, identification, and proof of income
• Accept a smaller loan amount or shorter repayment term to get approved

Meeting the minimum credit score and income requirements, keeping debts low, and having a cosigner (if needed) can increase your chances of securing a personal loan.

What to Expect from Personal Loan Lenders After Bankruptcy

Each lender has their own approval criteria, but here’s what to expect when applying for a personal loan after bankruptcy:

• Minimum credit scores required around 600, sometimes lower
• Income requirements vary, often $1,200+ per month
• Debt-to-income ratio limits around 50%
• Loan amounts from $1,000 to $15,000
• Interest rates ranging from 10% to 36%
• 1 to 5 year loan terms available
• Unsecured loans so no collateral required
• Lengthy application requiring documentation and info
• Hard credit check will be performed
• Higher chance of approval with a cosigner

While you will pay higher interest rates compared to borrowers with good credit, responsible use of a personal loan can help you rebuild credit after bankruptcy.

Steps to Apply for a Personal Loan After Bankruptcy

Follow this step-by-step guide when applying for a personal loan after bankruptcy:

1. Check your credit reports – Make sure all information is accurate and updated before applying. Dispute any errors.

2. Compare loan offers – Prequalify with multiple lenders to find the best rates for your situation. Consider fees too.

3. Choose a lender – Select a lender that offers an affordable payment, competitive rates, and flexible terms.

4. Gather required documents – W2s, pay stubs, tax returns, government ID, and proofs of residency.

5. Complete loan application – Fill out personal and financial information. Double check for accuracy.

6. Accept loan terms – Carefully review the loan agreement and make sure you understand the terms before signing.

7. Receive loan funds – If approved, loan proceeds will be deposited into your bank account within a few days.

Be sure to make your monthly payments on time going forward to avoid late fees and credit damage.

Alternatives to Personal Loans After Bankruptcy

If you are unable to qualify for a personal loan, here are a few alternatives to consider:

• Secured loan – Requires an asset like a savings account or vehicle title as collateral.

• Payday alternative loan – Offered by some credit unions for small amounts up to $1,000.

• Cash advances – Higher fees/rates but may approve those with recent bankruptcies.

• 401(k) or pension loan – Borrow against retirement savings (with risks).

• Cash-out mortgage refinance – Tap equity on your home if available.

• HELOC – Revolving line of credit using home equity as collateral, if qualified.

• Credit cards – Secured credit cards don’t require credit checks.

• Family loan – Borrow from relatives; draw up a contract.

• Peer-to-peer lending – Borrow from individual investors.

• Auto title loan – Loans of 25-50% the value of your paid-off vehicle.

While personal loans aren’t the only option, they provide affordable fixed rates without collateral. Following the tips above can help in getting approved for a personal loan even with past bankruptcies.