December 2, 2020
Is It Possible to Take Out a Loan After a Personal Bankruptcy?
Life is unpredictable, especially when it comes to your personal finances. Personal loans can be a great option when you need to purchase something expensive, such as for a home improvement or a new vehicle. People take out loans for a plethora of financial needs, but securing that loan can be tough if you’ve gone through a personal bankruptcy. Many people with a bankruptcy feel like they no longer have the option of applying, let alone receiving a personal loan. Here’s why that is not true and how you can go about obtaining a loan, even after going through a bankruptcy.
Understand and Fix Your Credit Report
There’s no going around it; your credit score is going to get hit hard during a bankruptcy. However, this does not mean you can’t save it from falling down even more. What you must do before applying for a loan is to both understand and to fix your credit report score. You may obtain a copy of your report from one of the three credit bureaus. Observe each debt on your report, and see what can be fixed and what is a mistake. After all, increasing your credit score by even a few points can potentially save you thousands in interest charges.
Gather Documents to Prove Income
When you apply for a loan, banks are going to see that you’ve been through a bankruptcy. Although this doesn’t automatically disqualify you from most banks, lenders are going to require proof of income to ensure that you have the means to pay them back. If you’re making a good living wage, then they may overlook the bankruptcy, but you are going to need a lot of documentation. Some of the documents required by a bank will include W2 forms, pay stubs, and even the income of your spouse.
Opt-In for Additional Screening
Loans aren’t usually so personal, but when lenders are meeting someone with a bankruptcy, they aren’t taking any chances. One of the things you are going to want to do is to prepare an explanation for your lender. This is an additional screening process that you are going to have to take part in, especially if you have damaged credit. In this explanation, you are going to be asked to explain what led to the bankruptcy as well as what you are doing now to make things right.
If you’ve had a personal bankruptcy, it isn’t impossible to get a loan. However, use these tips to be prepared for additional questioning and to help you get back on track.