Though filing bankruptcy will be visible on your credit report for up to eight years, the common belief that you will never be able to get a loan again is unfounded. With good financial management, you will be able to get a loan after filing bankruptcy; it will just be more difficult and the terms of the loan are likely to be less favorable than before filing bankruptcy.
Before applying for a loan after filing bankruptcy, it's important to consider whether you really need this loan? Remember that your credit will be more difficult to repair if you take out a loan too soon after declaring bankruptcy. Also, if your credit is still very much impaired, the lender will charge you a much higher interest rate than if you wait until your credit rating is better. It’s essential that you understand that when you are paying a higher interest rate, it will negatively impact the size of the loan as well as the life of the loan. If you really need the loan, you will need perseverance and most likely patience to secure it, because there’s a mandatory period of time you must wait after filing bankruptcy before you may apply for a loan.
Consumers who filed chapter 7 must wait for two years after the discharge before applying for a loan, and those who filed chapter 13 must pay their creditors in full. In order to qualify for a loan after filing bankruptcy, you'll have to prove to lenders you are no longer a credit risk. You’re best advised to maintain a regular income and make sure to pay all your bills on time. In addition, if you can responsibly maintain a credit card after filing bankruptcy, that will be to your advantage.
When you’ve made all your payments for your utilities and credit card on time for at least twelve months, you can ask the utility companies and credit card companies for a reference to prove to potential lenders you’ve learned to be financially responsible after filing bankruptcy. In addition, by waiting for twelve months and ensuring you pay your bills on time, your credit rating will rise significantly.
Your chances of being approved for a loan, and the terms of a potential loan, is directly linked to how much of a risk a lender estimates you to be after filing bankruptcy. Because your credit report will contain evidence of your filing bankruptcy, you will be placed in the higher risk category, making the interest rates on a potential loan go up and the term of the loan go down. It’s your responsibility to prove to lenders that you are capable to manage a loan after filing bankruptcy.