Personal Loans After Bankruptcy

Personal loans let you borrow a lump sum of cash to meet financial needs or goals. You might consider getting a personal loan after bankruptcy if you’re hoping to rebuild your credit history. Making on-time payments can work in your favor for credit score calculations. 

Qualifying for a personal loan can depend on your credit and how much time has passed since your filing. Some lenders extend loans to borrowers post-bankruptcy, but you may need to do research to find the right one. 

We’ll walk you through how to get a personal loan after bankruptcy and what to know before you borrow.  

Can you get a personal loan after filing for bankruptcy?

It’s possible to get approved for personal loans after a bankruptcy case is discharged. A discharge means a bankruptcy court has formally concluded your case, and you’re no longer obligated to pay the debts included in your filing. 

It’s possible to get a loan after bankruptcy, but it isn’t always easy. Bankruptcy is a negative event where your credit scores are concerned, and credit scores are the primary factor many lenders use for personal loan approval. The higher your credit score was before the bankruptcy, the steeper the drop in points may be. 

The impact of a bankruptcy filing fades over time, but it doesn’t disappear from your credit reports right away.

• Chapter 7 bankruptcy can remain on your credit reports for up to 10 years following a discharge.
• Chapter 13 bankruptcy can stay on your credit for up to seven years post-discharge. 

Chapter 7 bankruptcy allows you to wipe the slate clean on debt, including credit cards, personal loans, and medical bills. In exchange for erasing debts, you may have to turn over assets to the bankruptcy court. 

Chapter 13 bankruptcy allows you to restructure and repay your debts over three or five years. You don’t need to sacrifice any of your assets to do so. Here’s a quick comparison of these two bankruptcy options. 

Chapter 7	Chapter 13
Allows you to erase debts included in your bankruptcy filing.	Allows you to restructure and repay debts according to a set plan.
Filers may need to surrender assets to the bankruptcy court.	Filers keep all assets, regardless of their value.
Eligibility is determined by your debts, household income, and other financial obligations.	Eligibility is determined by your ability to repay your debts, based on your household income and other expenses.
Can be used to wipe out unsecured debts, such as credit cards or medical bills.	Can be used to repay unsecured or secured debts, such as overdue mortgage balances.

Our expert weighs in: Does the type of bankruptcy matter to lenders?

Erin Kinkade

CFP®

Chapter 7 and 13 bankruptcy affect your credit the same, but sometimes, a lender will favor one over the other. It depends on the lender.  I suggest budgeting wisely, keeping your credit utilization low (below 30%), and making on-time payments on all debts.

Can you get a personal loan after Chapter 7 discharge?

Yes, you can get a personal loan after a Chapter 7 bankruptcy discharge. You may need to consider a secured loan rather than an unsecured loan, depending on your credit scores. A secured loan requires collateral, which means an item with tangible value. 

For example, if you keep your vehicle in the bankruptcy filing, you might use it to secure a loan. Some lenders offer personal loans that accept a car title as collateral. But if you default on the loan, the lender can take your car. 

Can you get a personal loan after Chapter 13 bankruptcy?

Yes, you can get personal loans after Chapter 13 bankruptcy. However, you might have to wait longer than you would if you filed Chapter 7.

The bankruptcy court won’t issue a discharge for a Chapter 13 case until you’ve satisfied the requirements of your repayment plan. As we mentioned, your plan can last for three or five years, depending on how much debt you have and your income. 

Lenders that offer personal loans to borrowers with bankruptcies 

Finding a lender willing to offer a personal loan after bankruptcy can be challenging, but it’s not impossible. Several lenders offer personal loans with lower minimum credit score requirements or no minimum credit score requirement at all. 

There is one stipulation: You can’t have an active bankruptcy case on your credit history. Here are five personal loan lenders to consider once your case is discharged. 

Lender	Rates (APR)	Loan amts.	Min. credit score
Avant	9.95% – 35.99%	$2,000 – $35,000	None
LendingClub	9.57% – 35.99%	$1,000 – $40,000	600
OneMain Financial	18.00% – 35.99%	$1,500 – $20,000	None
Upgrade	8.49% – 35.99%	$1,000 – $50,000	580
Upstart	7.80% – 35.99%	$1,000 – $50,000	None

How to increase your chances of personal loan approval after bankruptcy 

Getting a personal loan after bankruptcy may be a waiting game if your credit score is below lenders’ minimum requirements. However, you can take these actions to increase your odds of approval. 

• Get a cosigner or co-borrower. Applying for a personal loan with a cosigner or co-borrower can make it easier to get approved if they have a strong credit history. You may also be able to get a lower interest rate. Keep in mind that the cosigner is equally liable for the debt, so their credit could suffer if you pay late or default. 
• Get credit for paying other bills. If you’re paying rent, utility bills, or cellphone bills, you may be able to get those payments added to your credit history. You can use a service such as Experian Boost to include those payments in your credit reports, which may help add points to your score. Even a small credit score increase could make it easier to get approved for a personal loan. 
• Try a secured loan. If you have something of value you could offer as collateral, a secured loan might be your best bet after bankruptcy. Just remember that if you fail to pay off the loan, the lender can keep your collateral. 

How to apply for a personal loan after bankruptcy 

Applying for a personal loan after bankruptcy may require a little more research because you’ll need to find the right lender. Checking your credit scores can give you a starting point for choosing where to apply. 

Here’s a step-by-step guide to applying for personal loans after a bankruptcy filing. 

1. Compare credit score requirements. Many personal loan lenders disclose their minimum credit score requirements online. You can screen lenders in or out of your search based on where your score aligns with the minimum required. 
2. Review other requirements. If you have a short list of lenders you’re considering, take a look at the other qualification requirements you’ll need to meet. Lenders can consider your income, employment, and other debts, as well as the status of your bankruptcy filing for approval. 
3. Gather your documents. Lenders may expect you to have certain documents ready to apply for a personal loan. They can include proof of identity, pay stubs, tax forms, and bank statements. You’ll also need to provide proof that your bankruptcy case has been discharged. 
4. Complete the application. If you’ve organized your documents, you can move on to the application stage. Here, you’ll fill out the lender’s application and attach any required supporting documents. Depending on the lender, you may get an instant approval decision.
5. Be prepared to explain. Your lender may ask for details about your bankruptcy filing, including when you filed and when the case was discharged. The bankruptcy will be on your credit anyway, so if your lender asks questions, just answer honestly and accurately. 

If you’re approved, you’ll need to sign off on the loan paperwork. You’ll also need to share your bank account information so the lender can deposit the loan funds. Depending on your choice of your lender, you may be able to get the funds as soon as the next business day.

Alternatives to personal loans if you have bankruptcies on your credit report

If you can’t get a personal loan after bankruptcy, you may have other options for borrowing. Each of these can have pros and cons. 

• Credit builder loans. Credit builder loans aren’t loans in the true sense; when you borrow, you don’t get access to the money right away. Instead, funds sit in a deposit account that earns interest. You make payments to the lender, and once the “debt” is satisfied, the lender turns over the loan funds and interest earned to you. Good credit isn’t a requirement for approval, but you may pay higher fees to borrow. 
• Secured credit cards. Secured credit cards often require a cash deposit to open, which may be a few hundred dollars. Opening this type of credit card and making on-time payments can help you reestablish your credit history after bankruptcy. And you may be able to convert to an unsecured card and get your deposit back after a few months. 
• Peer-to-peer lenders. Peer-to-peer lending platforms connect borrowers with people who have money to lend. It’s possible to get approved for P2P loans after bankruptcy, even with a low credit score. You may pay higher interest rates or fees to borrow. 
• Friends and family. Friends and family may be willing to lend money to you after bankruptcy. Getting a loan from people you know won’t help you build credit, but it likely won’t require a credit check either. Just be sure you can repay what you borrow to avoid bad blood. 

FAQ 

How does bankruptcy affect my credit score?

Filing for bankruptcy has a devastating impact on your credit score. The damage varies depending on your credit score prior to filing. Higher credit scores often see a more notable drop. Details of the bankruptcy remain on your credit report for seven to 10 years.

How long after bankruptcy can I apply for a personal loan?

There’s no standard waiting period to apply for a personal loan after bankruptcy. However, the bankruptcy’s negative impact on your credit profile can make it harder to secure a loan right after. Some lenders prefer to see a rebuilding of credit for a minimum of two years before approving a loan.

Are there any restrictions on how I can use a personal loan after bankruptcy?

Generally, personal loans have no restrictions on how they can be used. Whether it’s for consolidating debts, paying medical bills, or home improvements, you have discretion. The key is to ensure you can repay the loan on time, and use it wisely to avoid a repeating cycle of debt.

What if I can’t make payments on my personal loan if I’m approved for one after bankruptcy? 

The inability to repay a personal loan after bankruptcy can lead to severe financial consequences. If you foresee the inability to make payments, it’s important to contact your lender immediately. 

Many lenders are often willing to modify the loan terms or work out a repayment plan in such cases. Avoiding communication with the lender might lead to the loan going into default, perpetuating a negative credit cycle.