Let’s face it: bankruptcy can be a major blow.  While it offers relief from overwhelming debt, it also puts a strain on your credit score, making borrowing seem like a distant dream. However, there is hope! With time and strategic planning, you can restore your credit and qualify for a loan after bankruptcy. This blog will guide you through the process of getting a loan after bankruptcy.

Factors Affecting Loan Approval After Bankruptcy

Let’s explore these factors and how they impact your eligibility.

  • The Impact of Bankruptcy Type

The type of bankruptcy you filed plays a role in how lenders view your application. The two most familiar types are:

Chapter 7 Bankruptcy: This involves selling assets to repay debts. It stays on your credit report for ten years. While it offers a quicker, fresh start, Chapter 7 can make loan approval more challenging.

Chapter 13 Bankruptcy: Instead of liquidating assets, this allows you to keep your property through a court-approved repayment plan lasting 3-5 years. It stays on your credit report for seven years. Chapter 13 might seem more favorable to lenders due to the ongoing repayment, but applying for new credit during this period can be restricted.

  • Credit Score

Regardless of the Chapter you filed under, your credit score is a primary factor lenders consider when evaluating your loan application. A low score due to bankruptcy can lead to loan denials or high interest rates. Building a positive payment history on any remaining credit cards or new credit lines is essential if you want to obtain a personal loan. Secured cards are a great way to re-establish positive credit behavior and rebuild trust with lenders.

Steps to Secure a Loan After Bankruptcy

Although bankruptcy can affect your ability to obtain a personal loan, following these key steps can help you improve your chances of success.

  • Check Your Credit Report

Bankruptcy can significantly lower your credit score by up to 200 points. Request a free credit report to understand the impact and identify any errors. Typically, a score of at least 550 is needed for approval.

  • Consider a Co-signer for Stronger Approval Odds

A co-signer with good credit can raise your chances of loan approval and decrease your interest rate. A co-signer is legally liable for repayment if you default.

  • Plan Your Loan Amount and Shop Around

Before applying, figure out the exact amount you need to borrow. It helps avoid unnecessary debt. Higher loan amounts translate to larger monthly payments. Many lenders offer online pre-qualification, which provides an estimated rate and terms without impacting your credit score. It allows you to compare offers and find the best fit.

  • Create a Budget and Assess Affordability

Personal loans are significant financial commitments. Create a realistic budget to ensure you can comfortably afford the monthly payments. Only borrow an amount you can realistically repay to evade further economic stress.

  • Gather Required Documents

Prepare the necessary documents like your Social Security number, income verification (pay stubs), employment details, driver’s license, and potential tax returns. Having them readily available speeds up the application process.

The specific documents lenders require can vary based on how easily they can verify your identity and income, and the time elapsed since your bankruptcy filing. Gather everything you might need upfront to avoid delays.

  • Apply for a Loan and Review Offers

Once you’ve pre-qualified and compared offers, submit a formal application with your chosen lender. Be honest and thorough when providing information. Loan approval timelines vary by lender. Some decisions are made within a day, while others might take several business days.

  • Sign the Loan Agreement and Begin Repayment

Upon approval, examine and sign the loan agreement. Funding typically arrives within a few business days via ACH transfer. Make consistent and timely payments to re-establish your credit score and improve your overall financial status.


Acquiring a personal loan after bankruptcy can be an uphill climb, but it’s not insurmountable. While the initial loan terms might not be ideal, view them as a temporary hurdle. Consistent on-time payments and responsible credit management become your tools to rebuild trust with lenders. As your credit score strengthens, so too will your access to better loan options in the future.