7 crucial steps to follow to get a personal loan after bankruptcy

A frequent myth is that if you have filed bankruptcy, especially discharged bankruptcy, you would be unable to obtain any form of loan or credit. Although bankruptcy might have a negative influence on your credit score, it does not mean you are permanently ineligible or unfit to take on new debt.

Qualifying for a personal loan post bankruptcy

It is indeed possible to raise your credit score after filing for bankruptcy. Over time, you can establish credit by paying your debts and credit card bills on time, if you qualify.

After filing for bankruptcy, you can still get a personal loan or other type of credit, though it might be more challenging at first. Your credit management since bankruptcy, job history, and income stability may all be evaluated by lenders. At first, you might be given a higher interest rate, but if your credit score rises, this could alter.

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How to apply for a personal loan after bankruptcy?

It may seem impossible to get a personal loan after filing for bankruptcy, but it is doable with the right approach. The following steps can help. 

• Verify your credit report and score: Get a copy of your credit report and score before applying. This will help you identify any issues that may need to be fixed and gain a better understanding of your current circumstances. Equifax, Experian, and TransUnion are the three main credit bureaus from which you can obtain a free credit report once a year.
• Concentrate on rebuilding credit: Try to build a strong credit history because filing for bankruptcy can stay on your record for seven to ten years. Pay off all outstanding debts, loans, and credit card bills on time. Think about obtaining a secured credit card, which needs a deposit of cash to be approved for a credit line.
• Know your loan needs: Establish your desired loan usage as well as the precise amount you need. This will enable you to find lenders who offer loans that fit your requirements and financial constraints.
• Investigate and compare lenders: Don't choose the first one you come across. Examine and contrast the terms, conditions, and qualifications offered by different lenders, such as credit unions, banks, and online lenders.  Low credit score customers are catered to by certain lenders.
• Think about a co-signer (Optional): Having a creditworthy co-signer could improve your acceptance rate and possibly result in a lower interest rate. Pick your co-signer wisely, though, as they will be responsible for the loan should you be unable to repay it.

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If at all possible, get prequalified for a personal loan from one of the many lenders. This allows you to see the expected terms of your loan and interest rate without having to go through a credit check, which can lower your credit score.

• Prepare documentation: As you apply for a loan, gather supporting documents like proof of residency, bank statements, tax returns, and pay stubs.
• Apply confidently: Following your due diligence and completion of the necessary documentation, apply for a personal loan from the lender that provides the best terms for your loan.

However, even after taking these precautions, acquiring a personal loan after bankruptcy may result in a higher interest rate. Before you take on new debt, make sure you can afford the monthly installments.

Frequently Asked Questions (FAQs)

Q. How can I learn the reason behind the denial of my loan application?

Lenders are required by law to provide a notification of an “adverse action” that includes the reasons for the denial. Kindly take time to carefully read this letter. If you have any questions, get in touch with the lender directly.

Q. After being turned down for a personal loan, when may I apply again?

Spend some time improving your profile before reapplying. Shortly after, submitting several applications can lower your credit score.

Q. What are the personal loan interest rates?

Your credit score, the size, duration, and lender of the loan can all have a significant impact on interest rates. They usually fall between 6% and 36% or more.

Q. How long does it take to get a personal loan application approved?

Depending on the lender, approval times can be anywhere from a few hours to several days.

Q. Do personal loans have any fees attached?

Origination fees, late payment penalties, and prepayment penalties (in case you repay the loan early) might apply.