Bankruptcy can help in restricting or eliminating debt completely, but it can drop a credit score by nearly 240 points. This means applying for a personal loan or line of credit can be difficult. Difficult, not impossible.
How to Attain a Person Loan after You File Bankruptcy
A bankruptcy stays on your credit report for up to 10 years after the initial filing. However, it can help lower your debt-to-income ratio while you also work to improve your credit. However, personal loan lenders have strict income and credit score guidelines than you see with credit card companies.
If you’ve filed for bankruptcy and need a personal loan, here are five tips to help you secure that loan.
Monitor Your Score With A Credit Report
If you’re going to get control over your credit, you need to make sure to get a detailed look at your credit report from each of the credit bureaus – Equifax, Experian and TransUnion. AnnualCreditReport.com allows one free report each year. You don’t see your score, but you do see your financial history such as:
- Repayment history
- Credit history length
- Mix of credit
- New accounts
Where do you need improving?
Talk To Various Lenders About Your Financial Situation
When looking at personal loans, it’s always good to talk to more than one lender about your particular situation. You can reach out to traditional banks, credit unions, online lenders and peer-to-peer lenders. A credit union and community bank tend to be more forgiving than online lenders when talking about credit. This is great if you already have a good rapport with them.
Be Mindful Of Bad Credit Personal Loans
Some lenders have bad credit personal loans where the credit requirements are lax. The flexibility has a price though, usually in the form of very high-interest rates. Some rates can exceed 100 percent. Therefore, if you can’t pay the debt back on time, you’re trapped in the debt cycle. Since you’ve already filed bankruptcy once, you have to wait another several years before you can file once more.
Look At Secured Personal Loans
With a secured personal loan, the guidelines are a bit laxer, but you must have assets to back it up like a car, CD, investment, etc. A secured loan means lower interest rates. However, this kind of loan means risking your assets. If you default, they collectors could come get the vehicle or take control over the CD, etc. Only do this if you know you can pay the loan back.
Rebuild Your Credit
On-time payments and taking out a personal loan can help in rebuilding your credit, but it’s not the only way to do so. In fact, a secured credit card can help you out. A secured card means putting money down on a deposit that is equal to how much credit you have on the card. The limit might be low, but if you pay the card regularly, your credit score will see improvement.