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Applying for a personal loan after a bankruptcy filing

| Apr 6, 2021 | Bankruptcy

Finances and one’s credit score are important to individuals in Texas and elsewhere. These both can determine if one is able to afford a major purchase like a home or vehicle. However, certain life events can significantly impact one’s credit score. Filing for bankruptcy is one of them, causing individuals to wonder if their credit will ever be repaired or if he or she will be able to obtain a personal loan in the immediate future.

Credit score and filing for bankruptcy

It is well known that filing for bankruptcy will damage one’s credit score. Additionally, this filing will likely remain on one’s credit report for up to a decade. Thus, it can make his or her financial life challenging, especially when it comes to applying for a personal loan. While it is more challenging to get approval for a loan after a bankruptcy filing, this is not impossible.

Qualifying for a personal loan

Those seeking to secure a personal loan after a bankruptcy filing should keep in mind that they will likely endure high fees and well as higher interest rates if they are approved. As a means to increase one’s chances of qualifying for a personal loan after bankruptcy, it is important to consider what factors a lender will consider when reviewing an application.

Five common factors

There are five common factors used by lenders when determining to approve or deny an application for a personal loan and an applicant has filed for bankruptcy. First, they look at the type of bankruptcy. A chapter 7 bankruptcy can take four to six months to complete while a Chapter 13 can take up to five years to discharge debt. Second, they will look at when bankruptcy was filed for. Next, they will look at one’s credit score and history. Fourth, one’s income will be considered. Finally, the type of loan being applied for will be assessed. A secured loan required collateral while an unsecured loan doesn’t require collateral but is likely to come with a high interest rate.

Unfortunately, money controls much of our lives. It allows us to make major purchases but it also impacts one’s ability to pay bills. When an individual is struggling with debt, this can be an overwhelming experience. Thus, it is imperative that one considers how bankruptcy could benefit them and what life after filing for bankruptcy will look like. This information could help an individual make well-informed financial decisions and ensure his or her rights and interests are protected.