Personal Loan After Bankruptcy: Can You Qualify?
Written by: R. Lawrence Anderson
If you want to qualify for a personal loan after bankruptcy
there are four key areas that will determine how successful you
1) Your credit score 2) Collateral 3) Existing debt 4) Time
Let's look at each factor in more detail and how they can help
you increase your chance of qualifying for a personal loan after
1) Credit score: In order to qualify for a personal loan after
bankruptcy you will need to meet the lender's minimum credit
score criteria, provided the lender extends loans to individuals
with a recent bankruptcy. You'll want to find out before
applying for a loan: Simply ask the lender if they consider
applicants with a bankruptcy on their credit report.
Let's suppose the lender does. How can you increase your credit
score enough to qualify for a personal loan after bankruptcy?
The first step is to order copies of your credit reports from
the three major credit reporting agencies (Experian, Equifax,
and Trans Union). Next, make sure any inaccurate or obsolete
negative information on your credit reports is removed or
updated. I go into detail on this in After Bankruptcy Credit
Solutions. I also explain how to legally add positive lines of
credit to your credit reports, which is a very powerful way to
increase your credit score - but I'll save that for another
2) Collateral: Another major factor in obtaining a personal loan
after bankruptcy is how much collateral you have. Why? Because
if a lender has collateral that they can go after (i.e., equity
in your home) should you default on the loan, that reduces their
risk dramatically. So if you can provide collateral to the
lender, it can increase your chances of qualifying for a
personal loan after bankruptcy.
3) Existing debt: You don't want to have too much debt when you
apply for a personal loan after bankruptcy. If you do, the
lender may feel you don't have the capacity (enough income) to
cover the loan payment, because you have too many other monthly
expenses to pay (i.e., credit cards, auto payment, etc.) - as a
result you could get turned for a personal loan after bankruptcy.
On that note, find out if the lender has a minimum income
requirement, or debt-to-income ratio you need to meet. If they
do, make sure you meet their minimum requirement before you
apply for the loan.
4) Time: It's been said that "time heals all wounds" - well,
when it comes to obtaining a personal loan after bankruptcy this
can certainly be true if you've developed a positive payment
history since your bankruptcy.
When a lender is deciding whether or not to extend you a
personal loan after bankruptcy, your credit report will play a
major role. Generally speaking, if your credit report reflects a
positive payment history for at least two years since your
bankruptcy, it will certainly help.
We have looked at the four major factors that will determine
whether or not you qualify for a personal loan after bankruptcy:
Your credit score, collateral, existing debt, and time. To the
extent you can strengthen each one of these you increase your
chances of being approved for a personal loan after bankruptcy.
Even if you can't qualify for a personal loan after bankruptcy
immediately, don't be discouraged! Remember, time can heal all
wounds when it comes to qualifying for a personal loan after
bankruptcy. Just make sure to focus on increasing your credit
score, pay your existing bills on time, don't take on too much
debt, and build up your net worth.
About the author:
R. Lawrence Anderson is author of After Bankruptcy Credit
Solutions, which shows individuals how to qualify for credit and
loans after bankruptcy. For more information visit:
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