Steps to Success in Getting a Loan After Bankruptcy

By: Jon Arnold

Presumably you looked at all your possible alternatives and determined that bankruptcy was the only way to go. So now the papers have been filed, your slate has been wiped clean and you are ready to start over, this time not making the same mistakes you did the first time around. But one of the things you will very likely need is a loan and you may think that it is impossible to get a loan after bankruptcy.

Nothing could be further from the truth. It is far from impossible to get a loan after bankruptcy, although you are going to need to look beyond what you might consider to be your traditional lending sources like your bank or credit union.

The reason for this is that your bankruptcy shows up on your credit report in the equivalent of flashing red lights and huge neon signs so that potential lenders are aware that you have filed. And the reason for that is simple - you are now considered a much greater credit risk, and loans are placed and interest rates determined based on the amount of risk that the lender feels he needs to take with your loan.

The first thing you need to do is to make sure all of your debts have been fully discharged in your bankruptcy. If the proceedings are still taking place and it is not complete yet, you very likely have a very poor chance of securing a loan, since that is just about the highest risk factor that can be considered by a lender.

Some lenders require that there has been at least two years gone by since you filed and the time that you apply for a loan. But that policy is more "tradition" than anything else, and not many places follow that policy any more. The most important thing you can do and may have to prove and demonstrate is that you are making timely payments on any credit accounts you currently have open. This is critically important.

You will have a much easier time in getting your loan if you can get a secured loan, which is something backed up by some type of collateral such as a home, a car that is paid off, or sometimes even the sum total of your household goods. In certain ways, this can present a danger to you, since if the unexpected happens and you need to default on this secured loan, you stand a good chance of losing whatever you put up as collateral.

The preferred type of loan for you right now, especially since you probably do not have assets that can be put up for collateral on a secured loan, is to get an unsecured loan, sometimes also known as a signature loan. Again, as stated earlier, you are going to be a higher risk because of your past bankruptcy and also because the lender has nothing to repossess in case you default on the loan, but it can still be done.

A great place to look for a personal loan is online. In today's very competitive financial lending market, many potential lenders online can offer great programs and great rates, and do not rate you as poorly or as high of a risk as your traditional lending sources.

After you get your loan, be sure to move heaven and earth and whatever else is necessary to make your payments on time, every month, without fail. One of the things you are trying to do is to re-establish your credit, and there is nothing more positive on a credit report than noting that you have a history of billing your debts on time.

With a bit of due diligence on your part, you can find a loan after bankruptcy where the rates are not stratospheric and actually quite reasonable. Do some comparison shopping for your loan, as you would comparison shop for anything else, and do not consider yourself a second class citizen in the process because of your past bankruptcy.

Bankruptcy
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