Can You Get a Personal Loan After Bankruptcy?

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If you filed for bankruptcy lately, you’re not alone.

Close to 766,700 individuals and businesses filed for bankruptcy in 2017, according to the American Bankruptcy Institute.

Bankruptcy can restructure your debt, or wipe it out altogether. But it also hurts your credit score by anywhere from 130 to 240 points.

With damaged credit, it can be difficult to qualify for a personal loan or line of credit. That said, it’s not impossible.

If you’re looking for a personal loan after bankruptcy, here’s what you need to know about your chances.

How to get a personal loan after bankruptcy

Filing for bankruptcy doesn’t disqualify you from taking out a personal loan. However, it does stay on your credit report for up to 10 years.

Yet filing for bankruptcy isn’t all bad for your credit score. Discharging debt can actually help your credit score by lowering your debt-to-income ratio. You can also take steps to improve your credit during that time.

“Filing for bankruptcy provides the debtor with a ‘fresh start,'” explained Barry J. Roy, a partner at the New Jersey law firm Rabinowitz, Lubetkin & Tully LLC. “Debtors will be surprised at how soon after filing they start to receive credit card applications.”

Of course, personal loan lenders might have stricter income and credit score requirements than credit card companies, and some lenders look for stronger credentials than others.

If you’re looking for a personal loan after bankruptcy, here are five steps you should take before borrowing.

1. Order a credit report and monitor your credit score

The first step toward taking control of your credit is ordering a comprehensive report from the major credit bureaus: TransUnion, Equifax, and Experian. You can order one free credit report per year from AnnualCreditReport.com.

Although this report doesn’t show your credit score, it’ll show the rest of your financial history. You can also make sure your accounts are all up to date.

Plus, you can take a close look at the following factors that affect your credit score:

  • History of repayment

  • Debt

  • Length of credit history

  • Credit mix

  • New credit accounts

Consider each factor so you can figure out which ones you most need to improve. You should also monitor your credit score with a site such as Credit Karma. Some credit card companies will also show you your FICO score for free.

Understanding your credit history and score could help when presenting your application to a personal loan provider.

2. Speak with multiple lenders about your situation

Your next step is to explore your options for personal loans. You have a number of choices when it comes to borrowing, such as:

  • Online lenders

  • Peer-to-peer lenders

  • Credit unions

  • Traditional banks

Credit unions tend to be more forgiving than online lenders when it comes to credit. Your community bank might also be more willing to work with you if you’ve established a good relationship with them.

Since each lender sets its own criteria, it’s a good idea to shop around for a personal loan. Even if one lender rejects your application, another might be willing to loan you the funds you need. Plus, one lender might offer you better terms than another.

“The terms offered for the loan are up to the lender,” said Roy. “As you can imagine, people with ‘credit’ issues, do not receive the same loan and lease terms as those with stellar credit scores.”

3. Be careful around bad credit personal loans

There are some personal loan lenders that don’t have strict credit requirements, such as LoanNow. But this flexibility usually comes at a cost.

This type of lender often charges sky-high interest rates on its installment loans. LoanNow, for instance, has rates as high as 299.00%, as of June 11, 2018. Be sure to double-check the lender website for the latest rates.

Even though you’ll get funds quickly, you could end up paying way more than you originally borrowed.

If you’re unable to make payments, you could get trapped in a cycle of debt. You also won’t have bankruptcy as an option, since you have to wait years — eight for Chapter 7 bankruptcy and two for Chapter 13 — before you can file again.

“There are always people and businesses out there willing to loan money,” Roy said. “Just remember that you can only receive a discharge in [Chapter 7] bankruptcy every eight years, so be careful.”

Before borrowing any personal loan, make sure to estimate repayment with our personal loan calculator. That way, you’ll understand what your monthly payments will be, as well as how much interest you’ll have to pay.

If interest rates are too high, it might be better to avoid a personal loan and look for other options.

4. Consider taking out a secured personal loan

Secured personal loans have less stringent requirements than unsecured ones because they require collateral.

With a secured personal loan, you back up the debt with assets such as your savings, investments, CDs, car, or home.

Securing your debt might get you low interest rates. First Tech Federal Credit Union, for instance, offers low APRs on its secured personal loans.

But with this type of loan, you’re risking your assets. Debt collectors could seize them in the event you can’t repay your debt. Before risking repossession of your car or foreclosure of your home, make sure you’re confident you can pay back the loan.

5. Take steps to build your credit

Borrowing a personal loan and making on-time payments can help build your credit, but it’s not your only option.

Instead of starting with a personal loan after bankruptcy, you might open a secured credit card instead.

With a secured card, you put down a deposit that’s usually equal to your credit limit. Your credit limit might be low, but by paying your card on time every month, your credit score will improve.

Once it’s stronger, you’ll be in a better position to take out a personal loan.

Consider a Credit Repair Company

Building credit on your own can feel overwhelming. But you don’t have to do it alone: Working with a credit repair company can be one way to get help rebuilding your credit.

These credit repair services work with you to pull and review your credit reports, identify potential errors on your credit file and give you personalized advice to improve your credit scores. They can even work on your behalf to identify false or fraudulent information on your report, and dispute any errors and negotiate their removal.

You can learn more and get paired with trusted credit repair providers by visiting the LendingTree credit repair marketplace.

Interested in a personal loan?

Lendingtree allows you to compare rates from multiple lenders by filling out one easy form. Advertiser Disclosure

Student Loan Hero Advertiser Disclosure

Our team at Student Loan Hero works hard to find and recommend products and services that we believe are of high quality. We sometimes earn a sales commission or advertising fee when recommending various products and services to you. Similar to when you are being sold any product or service, be sure to read the fine print to help you understand what you are buying. Be sure to consult with a licensed professional if you have any concerns. Student Loan Hero is not a lender or investment advisor. We are not involved in the loan approval or investment process, nor do we make credit or investment related decisions. The rates and terms listed on our website are estimates and are subject to change at any time.

Advertiser Disclosure

Student Loan Hero Advertiser Disclosure

Our team at Student Loan Hero works hard to find and recommend products and services that we believe are of high quality. We sometimes earn a sales commission or advertising fee when recommending various products and services to you. Similar to when you are being sold any product or service, be sure to read the fine print to help you understand what you are buying. Be sure to consult with a licensed professional if you have any concerns. Student Loan Hero is not a lender or investment advisor. We are not involved in the loan approval or investment process, nor do we make credit or investment related decisions. The rates and terms listed on our website are estimates and are subject to change at any time.

RATES (APR)loan amount
5.47% – 17.67%1 $5,000 to $100,000
5.59% – 35.99% $1,000 to $50,000
7.99% – 35.89%* $1,000 to $50,000
5.99% – 24.99%3 $5,000 to $35,000
5.99% – 29.99%4 $7,500 to $40,000
4.99% – 23.99% $3,500 to $55,000
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1 Includes AutoPay discount. Important Disclosures for SoFi.

SoFi Disclosures

  1. Fixed rates from 5.990% APR to 17.67% APR (with AutoPay). Variable rates from 5.47% APR to 14.700% APR (with AutoPay). SoFi rate ranges are current as of September 1, 2019 and are subject to change without notice. Not all rates and amounts available in all states. See Personal Loan eligibility details. Not all applicants qualify for the lowest rate. If approved for a loan, to qualify for the lowest rate, you must have a responsible financial history and meet other conditions. Your actual rate will be within the range of rates listed above and will depend on a variety of factors, including evaluation of your credit worthiness, years of professional experience, income and other factors. See APR examples and terms. Interest rates on variable rate loans are capped at 14.95%. Lowest variable rate of 5.60% APR assumes current 1-month LIBOR rate of 2.27% plus 3.08% margin minus 0.25% AutoPay discount. For the SoFi variable rate loan, the 1-month LIBOR index will adjust monthly and the loan payment will be re-amortized and may change monthly. APRs for variable rate loans may increase after origination if the LIBOR index increases. The SoFi 0.25% AutoPay interest rate reduction requires you to agree to make monthly principal and interest payments by an automatic monthly deduction from a savings or checking account. The benefit will discontinue and be lost for periods in which you do not pay by automatic deduction from a savings or checking account.
  2. To check the rates and terms you qualify for, SoFi conducts a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, we will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull.
    See Consumer Licenses.
  3. Minimum Credit Score: Not all applicants who meet SoFi’s minimum credit score requirements are approved for a personal loan. In addition to meeting SoFi’s minimum eligibility criteria, applicants must also meet other credit and underwriting requirements to qualify.
  4. SoFi Personal Loans are not available to residents of MS. Maximum interest rate on loans for residents of AK and WY is 9.99% APR, for residents of IL with loans over $40,000 is 8.99% APR, for residents of TX is 9.99% APR on terms greater than 5 years, for residents of CO, CT, HI, VA, SC is 11.99% APR, and for residents of ME is 12.24% APR. Personal loans not available to residents of MI who already have a student loan with SoFi. Personal Loans minimum loan amount is $5,000. Residents of AZ, MA, and NH have a minimum loan amount of $10,001. Residents of KY have a minimum loan amount of $15,001. Residents of PA have a minimum loan amount of $25,001. Variable rates not available to residents of AK, TX, VA, WY, or for residents of IL for loans greater than $40,000.
  5. If you lose your job through no fault of your own, you may apply for Unemployment Protection. SoFi will suspend your monthly SoFi loan payments and provide job placement assistance during your forbearance period. Interest will continue to accrue and will be added to your principal balance at the end of each forbearance period, to the extent permitted by applicable law. Benefits are offered in three month increments, and capped at 12 months, in aggregate, over the life of the loan. To be eligible for this assistance you must provide proof that you have applied for and are eligible for unemployment compensation, and you must actively work with our Career Advisory Group to look for new employment. If the loan is co-signed the unemployment protection applies where both the borrower and cosigner lose their job and meet conditions.
  6. Terms and Conditions Apply: SOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE. To qualify, a borrower must be a U.S. citizen or permanent resident in an eligible state and meet SoFi’s underwriting requirements. Not all borrowers receive the lowest rate. To qualify for the lowest rate, you must have a responsible financial history and meet other conditions. If approved, your actual rate will be within the range of rates listed above and will depend on a variety of factors, including term of loan, a responsible financial history, years of experience, income and other factors. Rates and Terms are subject to change at anytime without notice and are subject to state restrictions. SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers such as Income Based Repayment or Income Contingent Repayment or PAYE. Licensed by the Department of Business Oversight under the California Financing Law License No. 6054612. SoFi loans are originated by SoFi Lending Corp., NMLS # 1121636. (www.nmlsconsumeraccess.org)
3 Includes AutoPay discount. Important Disclosures for Payoff.

Payoff Disclosures

  1. All loans are subject to credit review and approval. Your actual rate depends upon credit score, loan amount, loan term, credit usage and history. Currently loans are not offered in: MA, MS, NE, NV, OH, and WV.
4 Important Disclosures for FreedomPlus.

FreedomPlus Disclosures

  1. All loans available through FreedomPlus.com are made by Cross River Bank, a New Jersey State Chartered Commercial Bank, Member FDIC, Equal Housing Lender. All loan and rate terms are subject to eligibility restrictions, application review, credit score, loan amount, loan term, lender approval, and credit usage and history. Eligibility for a loan is not guaranteed. Loans are not available to residents of all states – please call a FreedomPlus representative for further details. The following limitations, in addition to others, shall apply: FreedomPlus does not arrange loans in: (i) Arizona under $10,500; (ii) Massachusetts under $6,500, (iii) Ohio under $5,500, and (iv) Georgia under $3,500. Repayment periods range from 24 to 60 months. The range of APRs on loans made available through FreedomPlus is 5.99% to a maximum of 29.99%. APR. The APR calculation includes all applicable fees, including the loan origination fee. For Example, a four year $20,000 loan with an interest rate of 15.49% and corresponding APR of 18.34% would have an estimated monthly payment of $561.60 and a total cost payable of $7,948.13. To qualify for a 5.99% APR loan, a borrower will need excellent credit on a loan for an amount less than $12,000.00, and with a term equal to 24 months. Adding a co-borrower with sufficient income; using at least eighty-five percent (85%) of the loan proceeds to directly pay off qualifying existing debt; or showing proof of sufficient retirement savings, could help you also qualify for the lowest rate available.
* Important Disclosures for Upgrade Bank.

Upgrade Bank Disclosures

* Your loan terms are not guaranteed and are subject to our verification and review process. You may be asked to provide additional documents to enable us to verify your income and your identity. This rate includes an Autopay APR reduction of 0.5%. By enrolling in Autopay your payments will be automatically deducted from you bank account. Selecting Autopay is optional. Annual Percentage Rate is inclusive of a loan origination fee, which is deducted from the loan proceeds. Late payments or subsequent charges and fees may increase the cost of your fixed rate loan. All loans made by WebBank, member FDIC. Please refer to Upgrade’s Terms of Use and Borrower Agreement for all terms, conditions and requirements.

** Accept your loan offer and your funds will be sent to your bank via ACH within one (1) business day of clearing necessary verifications. Availability of the funds is dependent on how quickly your bank processes this transaction. From the time of approval, funds should be available within four (4) business days.

 Important Disclosures for Citizen.

Citizens Bank Disclosures

  1. Personal Loan Rate Disclosure: Fixed interest rates from 6.79% – 20.89% (6.79% – 20.89% APR) based on applicable terms. Lowest rates range from 5.99%- 18.99% (5.99%-18.99% APR), are for eligible applicants, require a 3-year repayment term, and include our Loyalty and Automatic Payment Discounts of 0.25 percentage points each, as outlined in the Loyalty Discount and Automatic Payment Discount disclosures. Subject to additional terms and conditions, and rates are subject to change at any time without notice. Such changes will only apply to applications taken after the effective date of change.
  2. Loyalty Discount: The borrower will be eligible for a 0.25 percentage point interest rate reduction on their loan if the borrower has a qualifying account in existence with us at the time the borrower has submitted a completed application authorizing us to review their credit request for the loan. The following are qualifying accounts: any checking account, savings account, money market account, certificate of deposit, automobile loan, home equity loan, home equity line of credit, mortgage, credit card account, student loans or other personal loans owned by Citizens Bank, N.A. Please note, our checking and savings account options are only available in the following states: CT, DE, MA, MI, NH, NJ, NY, OH, PA, RI and VT. This discount will be reflected in the interest rate and Annual Percentage Rate (APR) disclosed in the Truth-In-Lending Disclosure that will be provided to the borrower once the loan is approved. Limit of one Loyalty Discount per loan, and discount will not be applied to prior loans. The Loyalty Discount will remain in effect for the life of the loan.
     
  3. Automatic Payment Discount: Borrowers will be eligible to receive a 0.25 percentage point interest rate reduction on their Citizens Bank Personal Loan during such time as payments are required to be made and our loan servicer is authorized to automatically deduct payments each month from any bank account the borrower designates. If our loan servicer is unable to successfully withdraw the automatic deductions from the designated account two or more times within any 12-month period, the borrower will no longer be eligible for this discount.

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