It can be hard for a person who have filed for bankruptcy to obtain a personal loan from a bank. This is because the bank has doubts that you can repay back the loan given you are already in a difficult financial situation. In order to get approved for an unsecured loan, you must take some steps to increase your credit score.
One way to improve your credit score is to apply for a secured or bad credit credit card. Secured card does not have any credit score requirement but it does require you to deposit some money as collateral. The amount of money that you put in as collateral equal to your credit line. You will be able to develop a good payment history if you keep on making repayment for 12 – 18 months. It is recommended that you work on building your credit score for at least 6 months prior to applying for a personal loan.
If you need money urgently, you can first apply a secured loan from a bank or credit union. The difference between a bank and credit union is that the credit union’s interest rate is lower so you pay lesser in the monthly repayment billing cycle. The personal loans offered through the credit unions can only be applied by the people who join its membership. There are several criteria to meet before you can become a member of the credit union.
Secured loan is easier to apply because there is a collateral protecting the lender. In the event that you fail to repay the loan on time, the collateral will be used to repay back the loan. To easily get approved for a secured loan, you should try to put in as much money as possible in the collateral. Secure loans means higher interest rates even though the repayment term may be longer.
You will lose the collateral if you can’t meet the repayment on the due date so you must confirm that you have the financial means to repay the loans. Aside from the amount you put into the collateral, there are also other factors that determine the approval of the unsecured personal loans for example, loan amount, repayment time and how much increase in the credit score after you file for bankruptcy.
Even though the bank would not approve your loan request, there are other smaller loan companies that are willing to approve your loans quickly without checking your credit score or background. For example, you can take out a loan with a payday loan company or apply for an online loan through a P2P platform. Payday loans is a loan up to $1000 that you need to repay by the next pay day. P2P loan is an investors’ funded loans that does not require collateral but the lender will look at your credit history to decide whether they want to approve the loan.