Yes. It is possible to get a loan after bankruptcy.
Nothing turns your finances upside down like bankruptcy. It hurts your credit and can last up to ten years.
It becomes impossible to get a loan, including a personal loan. When you eventually find a lender willing to consider you for a loan, the interest rates tend to be higher than the regular rates.
Chapter 7 means all your debts are wiped out to give you a fresh start. It affects your credit score, but it improves as time passes by.
The court can also liquidate some properties to help you meet some of your obligations. However, you have to adopt good habits to increase your credit score because you may still need to get a mortgage or car loan after bankruptcy.
Here are a few steps to follow when looking to get a personal loan or buy a home after chapter 7. They include:
Get Credit Reports
You must check your credit ratings before applying for a mortgage after bankruptcy or other loans.
Note that your debts will be listed in the credit reports, but the balance will be zero. Also, check to see that even the court-ordered repayment plans are included. They are known as chapter 13 and help to grow your credit score.
Prove Income Stability
When applying for;
- Mortgage after bankruptcy
- Car loan after bankruptcy
- Buying a house after chapter 7
You will be required to provide proof of income, including pay stubs and W-2s, among other documents. They help show that you have sufficient income to repay the loan despite being bankrupt.
You can also include your spouse’s income and any side-hustle you may have to appeal to the creditors and help reduce your risk to lenders.
Have A Proper Explanation
Prepare a letter explaining the circumstances that led to your bankruptcy and state your strategy to remedy the issue. Lenders might be a little lenient if the bankruptcy was caused by unforeseen problems such as medical issues.
Stay Away From High Rates
A loan after bankruptcy will come with high interest. But, you should shop around and settle for one with the least possible interest rate.
Avoid lenders who check credit ratings because they give loans with exorbitant interest. Before starting the loan application process, use the lender’s loan calculator to find your interest rate based on your credit score.
Other Alternatives Of Finding A Loan After Bankruptcy
While it’s possible to qualify for a personal loan, sometimes, you may not find a lender to give you one.
However, all is not lost; here are three more options you can explore when looking forward to purchasing such as; buying a house after chapter 7.
Credit-loan Builder Loans
You can use small financial institutions to build your credit score again. The loans do not go above $1000, but you must make monthly installments plus interest. Use an institution that will send reports to all credit bureaus, to increase your credit score.
Use Secured Credit Cards
Instead of a credit card, choose to get a secured credit card. Your collateral is your cash, and the provider will send reports to credit bureaus and help rebuild your credit history.
Get A Loan Co-signer
When getting a mortgage after bankruptcy or any other loan, find someone willing to cosign a loan with you. It becomes easier if the other person has a good credit score and history.
Buying a home after chapter 7 should not be complex. Just come up with a plan to improve your credit score. The methods above will help you grow your credit and increase your chances of finding a loan after bankruptcy.