There is a school of thought that bankruptcy is effectively the end of any kind of credit deal. Traditional lenders certainly are reluctant to lend money to anyone who has been declared bankrupt at least 2 years prior to an application. But it is possible to get post bankruptcy personal loans.
The logical behind the thinking is fair, with lenders entitled to be cautious about approving applicants seeking approval with poor credit histories, but it is worth noting that bankruptcy does not mean an end to income and financial responsibility.
What this means is that receiving personal loan repayments is still possible, especially when the specific hardship which prompted bankruptcy proceedings has been overcome. And if this is the case, the lenders can still feel confident in granting loan approval.
The Truth of Your Situation
But how can someone that has been declared bankrupt not find themselves avoided by a lender, whether they are traditional lenders or online lenders? Knowing the truth of the bankruptcy situation is the key. Once this is understood, the route to a post bankruptcy personal loan is clearer.
The lending world has a vast variety of lenders in it, and there are some lending firms that specialize in post bankruptcy loans. In fact, given that such applicants have no existing debt to figure into the equation the chances of default are extremely low. For that reason, approval with poor credit histories is plausible.
Also, lenders are willing to accept that bankruptcy was likely the only way out of an impossible financial situation.
Recent years have seen the number seeking bankruptcy increase, so it no longer reflects terribly on a personal loan applicant.
The Significance of the Debt-To-Income Ratio
So, what is the fuss about not having existing debts anymore? That question might seem strange, but the explanation is pretty straightforward. Like any other loan, a post bankruptcy personal loan needs to fit within the debt-to-income ratio set by the lending industry.
The ratio states that a maximum 40% of available income can be used to repay debts. But since there is no existing debt, that means the repayment sum each month can be quite high. This automatically means that, even with a large loan, getting approval with poor credit histories is easier.
For example, if an applicant earns $4,000 per month, then the maximum to commit to repaying loans is $1,000. With no other debts, it means the repayment on the personal loan can be $1,000, thereby making a 3-year loan of around $30,000 affordable.
How To Qualify
It is worth noting that post bankruptcy personal loans are staggered according to the period of time that has elapsed since the ruling was made. So, it is extremely difficult to get a loan 3 months after being declared bankruptcy, but not so difficult after 2 years.
However, loans of perhaps no more than $3,000 are available for the first 12 months, and after that $5,000 up to $10,000 can be secured. Of course, getting approval with poor credit histories is never guaranteed, but collateral can make a huge difference.
However, it is advisable to take out small personal loans as soon as possible because repaying them allows the borrower to begin to rebuild their credit rating.
Also, getting approval is easier when a clean break is made. So, close your bank account and open another, switch credit card companies and do not forget to look closely at what your mistakes were in the past to avoid committing them again.