Need To Get A Loan But Has Declared Bankruptcy
You may not be aware of this when you decided to file bankruptcy, but it will not be easy to get any types of personal loans in future even after you are fully discharged from bankruptcy. Firstly, a bankruptcy is very damaging to your credit history and it can take at least 7 years before it can be removed. That means your FICO credit score will be deducted by around 200 to 250 points as long as a bankrupt is reported. And when lenders run a credit check on you, they will be very reluctant to lend you money because of your past behavior in money matters.
The fastest way to get a small cash loan is the many online payday loan web sites. Review and choose a legit lender with no credit check so that you can borrow up to $2000 despite being bankrupt. These are very short term loans you need to pay back within 100 days, so the interest fees will become very expensive. They are not intended to help you buy a car or home down payment.
Since it is very difficult to get around without any personal credit after bankruptcy, you need to learn and plan in advance how to qualify for personal loans after bankruptcy discharge. Firstly, try and understand how lenders verify and review loan applications. All lenders want to ensure you have the ability to repay the loans at the interest rates charged. Usually, they look at the following indicators:
1. FICO Credit Score
3. Existing Income to Debt Ratio
4. Credit Repair After Bankruptcy Discharge
Depending on the loan companies, some will require you to meet all the above requirements while other lenders are willing to overlook poor credit ratings or past bankruptcy in exchange for higher interest rates. You will have better luck finding online loan lenders that are willing to give personal loans for people with bankruptcy compared to traditional banks and credit unions.
If you still cannot get approved, try to look how you fare for each of the 4 factors we mentioned. By improving any of these, you can increase your chances of getting approved for cheaper loans for bankruptcy.
Improve Credit Score After Bankruptcy
Nearly everything is now tied to your credit score so it is very important to keep your credit history as clean as possible. You can order a free credit report from Equifax, Trans Union, and Experian, these are the 3 main credit agencies in US. Check whether there are any incorrect entries recorded against you that can lower your FICO score unfairly. This should be done at least once a year and three weeks before you want to get a major loan. You can submit a request to dispute and remove any invalid or outdated information on your credit report.
A higher FICO score will help you qualify for cheaper loans. For example, with a 700+ FICO score, banks will welcome you to take any of their low interest rate loans. Note that some lenders will still reject borrowers with bankruptcy history even if they satisfy the minimum credit score requirements. However, some loan companies are ok with bad credit after bankruptcy.
Lenders That Accept Collateral For Bankruptcy Loans
Being able to offer some collateral is the best bet against having to borrow money with bad credit post bankruptcy. Collateral such as house title have more weight age compared to high FICO scores and allow you to get $10,000 loans after bankruptcy easily. These are known as secured personal loans and is highly recommended if you need the best loan interest rates post bankruptcy.
Lenders that accept collateral for post bankruptcy loans are willing to reduce the interest rates as well s lend you more money because they can legally claim and sell off the pledged asset if you default. Even if you have poor credit, you can still borrow money after a recent bankruptcy by pledging your car or house.
Borrow Money Despite A Lot Of Debts
Banks and loan companies will also check your existing level of debts especially when you apply for a bad credit loan. When your debt to income ratio (DTI) is too high, you are a high risk borrower because your income may not be sufficient to meet all your debt obligations every month. Try to pay off the smaller loans first as this will lower your DTI for easy personal loan applications. Some lenders also have a minimum income requirement, the average being $1500 a month. If you earn less than that, then you need not waste the time approaching these loan companies.
Credit Repair After Bankruptcy
If you have been fully discharged from bankruptcy for many years but your FICO credit is still very low, it tells the banks that you are not handling your finances properly and are still at risk of a second bankruptcy. That is very bad and you are not likely to get a loan. On the other hand, if you show progressive improvements in your credit activities, you will be able to qualify for a big loan within one to two years to buy a house or car. Positive and responsible use of personal revolving credit such as credit cards for people with bankruptcy will demonstrate your ability to handle your income and expenses prudently.
Carefully review these 4 points before going out to find a lender that gives unsecured loans to people after bankruptcy. When you keep getting declined, start on credit repair and paying off smaller debts first. Try getting smaller loans for bad credit first because many companies will offer bigger loans for returning customers. There are legit loan companies online that will give high risk loans after bankruptcy although the APR is higher.
Even if you do not need a loan now, it is highly recommended you follow the above advice to improve your credit and finances after bankruptcy. So when you do need to borrow money, you will be eligible for cheap bank loans with ok credit score instead of the high risk no credit check loan lender web sites with expensive rates.