Can You Get a Personal Loan After Bankruptcy?

After completing bankruptcy proceedings, your financial situation will be very different. Although you will no longer have the threat of debt, foreclosure, and so on, some things will become harder to do. It is possible that sometime, you will want to get another loan. Since bankruptcy stays on your credit report for seven to ten years, this may be hard to do. As a result, it is important to know your financial options after completing bankruptcy proceedings.

By clearing your debts, bankruptcy says that you are unable to meet the stipulations of the loan, and you are clearing it without completing your obligation to the lender. As a result, future lenders will be more reluctant to lend to you. A personal loan is one that is unsecured – that is, backed by your word rather than by your assets. Since lenders are unlikely to trust your word, it will be harder to receive a personal loan, especially after so many defaults from bad credit debtors leading up to the recent economic crisis.

Still, though, it may be possible to receive a personal loan. However, it is important to know that your interest rate on the loan will likely be much higher than normal – lenders must do this in order to protect themselves against a future bankruptcy proceeding. As a result, it becomes even more important to budget your finances. In certain situations, it may be better to attempt to build credit back before trying to take out a personal loan, but if you are sure that you want to take out a loan, then you must be prepared. You should give yourself more room in your budget to make payments, since it will be that much more important to not miss payments. So, instead of taking the largest loan that they will give you, it may be better to take a slightly smaller loan and take your time.

Filing for bankruptcy sends a strong message to creditors, and it becomes important for you to build back your credit slowly over time while the bankruptcy is on your credit report. However, if you are sure that you want a personal loan, be aware of the risks that come with it, including a higher interest rate, and the threat of falling back into the same debt cycle as before bankruptcy.

Graham Billings

Graham Billings

Graham Billings is a senior at the University of North Carolina at Chapel Hill with a double major in Economics and Political Science. He plans to graduate in December of 2009 and then attend law school in the fall of 2010. He is a member of the Economics Club at Carolina, which brings in speakers and hosts events in order to discuss current economic issues and help those who do not have a background in economics become more familiar with it. He is a National Merit Scholar and Dean’s List recipient. He is originally from Greensboro, North Carolina and attended the Early College at Guilford for high school, taking classes at Guilford College. In addition to economics, his academic interests include the legal and political system. He headed the only student-run, high school-level Honor Court in high school and participated in a national model Congress in San Francisco, run by Harvard students, and won awards of excellence for his work on the mock Supreme Court. Additionally, he tutors Carolina students in economics on a volunteer basis.
Graham Billings

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