Can You Get a Loan After Having a Bankruptcy?
Filing for bankruptcy protection is not a credit death sentence. This will not prevent you from obtaining a new loan within weeks or months after your bankruptcy discharge. That doesn't mean mortgage lenders will offer you a $1 million loan right away, or credit card companies will be begging you to borrow $20,000 immediately. It does mean you may obtain credit if you're willing to pay a higher interest rate than you might have before the bankruptcy.
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Start Small
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When recovering from the bankruptcy, it's not about getting the largest loan as soon as possible. Your goal should be to re-establish credit with a positive payment history. It won't do you much good to go out and charge up a lot of debt if you cannot afford the payments. If you miss a payment after bankruptcy, this made show lenders you're not serious about recovering your credit profile.
Credit Cards
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Start with a small credit card, either unsecured or a secured credit card from a local bank. There are some credit card companies, which specialize in providing unsecured credit cards to people just out of bankruptcy. The interest rates on these cards are high. Secured credit cards are provided by banks for taking deposits. Your credit line is equal to the amount of deposit you place. Some banks may increase the credit line by a certain percentage over the amount of the deposit.
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Auto Loans
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Once you establish one or two small credit cards and create a payment history for a few months, this may help you obtain a car loan. The interest rate on your auto loan will be significantly higher than what you see advertised on TV. You probably will not qualify for the low down payment and zero interest loans sometimes advertised. Expect to a double-digit interest rate for your car loan. You may have to find a dealership that specializes in working with people right out of bankruptcy. You might even one visit a bank or a credit union and become the qualified for the car loan before you go shopping.
Mortgage
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Mortgage companies taking previous bankruptcy very seriously. Loans insured by the Federal Housing Administration require you wait at least two years after the discharge of a Chapter 7 bankruptcy before offering a loan. FHA also requires all post-bankruptcy credit activity be positive. Any negative credit activity after bankruptcy can cause an FHA mortgage application to be denied. Fannie Mae and Freddie Mac both require you wait at least four years after the discharge of a Chapter 7 bankruptcy before providing a mortgage.
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