Best Personal Loans for Bankruptcy

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Contributor, Benzinga
November 20, 2023

Declaring bankruptcy is a challenging decision. While bankruptcy can help you consolidate debt or negotiate new terms with creditors, it comes with significant downsides. Bankruptcy filings stay on your credit report for up to 10 years, and poor credit can hinder your ability to get a job, insurance and even a home.

If you have a bankruptcy filing on your credit report, a personal loan can be helpful. Follow Benzinga’s guide to find the best personal loans for bankruptcy.

Quick Look: The Best Personal Loans for Bankruptcy

Best Personal Loans for Bankruptcy

Benzinga has put together the best personal loans for bankruptcy to give you an idea of all the platforms that can help you.

1. Best for Comparing Lenders: LendingClub

LendingClub is a unique lending platform that allows you to check your eligibility without impacting your credit, complete the process online and get funded in around 24 hours. You will see a range of loan offers that will help you choose the best program for the situation, and you can proceed with the loan as needed.

LendingClub also makes it clear that you may want to apply with a co-signer to improve your chances of being approved. With this type of customer support and information, it’s much easier to make the most of your finances after bankruptcy, especially because it can be more difficult than ever to get loans from traditional banks.

Pros

  • Can take out a joint loan
  • Debt consolidation loan options to avoid bankruptcy
  • Soft credit check is all that’s required for prequalification
  • Ability to shift payment date to fit your income

Cons

  • Must pay an origination fee
  • Managing your loan requires logging in through a browser

2. Best for No Credit Score: NetCredit

NetCredit is a good place to turn when you have no credit or, perhaps, you’ve experienced some struggles like bankruptcy. You can get approved in funded in just a few days, and there are no prepayment fees.

You should make sure NetCredit is offered in your state. It’s not available in Colorado, Connecticut, Iowa, Maine, Maryland, Nevada, New Hampshire, New York, North Carolina, Pennsylvania, Vermont, West Virginia and Washington, D.C.

You can check your chances for preapproval with a soft credit pull, but interest rates could be high depending on your credit score. You may want to try working with a co-signer.

Consider NetCredit when you want to get going in the right direction after bankruptcy and you’re trying to build your credit, access some cash and regain some semblance of financial independence.

Pros

  • Fast funding to help you get back on your feet
  • You choose when your payment date is
  • Low origination fees
  • Nominal late fees
  • Wide range of loan terms and values

Cons

  • High interest rates can cost up to 50% of your principal
  • No prequalification process

3. Best for Home Improvement Loans: Upgrade

Upgrade is a great place for those who have experienced financial troubles to get fast approval as it markets your loan to its many partners. You can choose from a wide range of terms and values, but you will notice that the loans you’re offered could be quite diverse depending on how much the lender wants to charge.

Even though Upgrade doesn’t lend to your business directly, it ensures that you have the best experience and find the funding you’ve been looking for. This is a good place to market your loan to as many lenders as possible, especially when seeking bankruptcy loans.

Because you’re trying to restart your finances, you can use the funds you borrow for any purpose, and you can work out repayment, refinancing and other issues with your lender. If you need additional support, you can always reach out to Upgrade for help.

Pros

  • Options for secured or joint loans
  • Easy-to-use mobile app helps manage the loan
  • Debt consolidation loans available with direct payment to creditors

Cons

  • Must pay a loan origination fee
  • Payment dates not flexible

4. Best for Comparing Lenders: Credible

  • Credible Personal Loan
    Best For:
    Comparing lenders

    See Terms*

    NMLS# DISCLOSURE

    Credible Operations, Inc. NMLS# 1681276

    Credible. Not available in all states. www.nmlsconsumeraccess.org.

    320 Blackwell Street Suite200 Durham, NC 27701

    Credible Operations, Inc. NMLS# 1681276, “Credible.” Not available in all states. 

    All bonus payments are by gift card. See terms

    Prequalified rates are based on the information you provide and a soft credit inquiry. Receiving prequalified rates does not guarantee that the Lender will extend you an offer of credit. You are not yet approved for a loan or a specific rate. All credit decisions, including loan approval, if any, are determined by Lenders, in their sole discretion. Rates and terms are subject to change without notice. Rates from Lenders may differ from prequalified rates due to factors which may include, but are not limited to: (i) changes in your personal credit circumstances; (ii) additional information in your hard credit pull and/or additional information you provide (or are unable to provide) to the Lender during the underwriting process; and/or (iii) changes in APRs (e.g., an increase in the rate index between the time of prequalification and the time of application or loan closing. (Or, if the loan option is a variable rate loan, then the interest rate index used to set the APR is subject to increases or decreases at any time). Lenders reserve the right to change or withdraw the prequalified rates at any time.

    Won’t impact your credit score DISCLOSURE: (May be in the footer, a tooltip, or a popup the user has to click on or scroll to see)

    Requesting prequalified rates on Credible is free and doesn’t affect your credit score. However, applying for or closing a loan will involve a hard credit pull that impacts your credit score and closing a loan will result in costs to you.

    “We accept advertising compensation from companies that appear on this site, which impacts the location and order in which brands (and/or their products) are presented, and also impacts the score that is assigned to it. Company lists on this page DO NOT imply endorsement. We do not feature all providers on the market.

    We receive compensation from the companies below if you click on a link or purchase a product. Amount of compensation may impact the ranking or placement of a particular product. Not all available financial products and offers from all financial institutions have been reviewed by this website. This content is not provided by Credible or any of the Providers on the Credible website. Any opinions, analyses, reviews or recommendations expressed here are those of the author’s alone, and have not been reviewed, approved or otherwise endorsed by Credible.

Credible is another loan aggregator that brings together all the best deals so you can choose the best loan for your financial situation.

Remember, when you work with a company like Credible, you need to make sure you understand how much the lender you choose can charge in your state. This is especially important when you have just experienced bankruptcy and you need to access some cash. 

You can reach back out to Credible for help, but you will ultimately pay the lender and deal with their terms. If you ever want to refinance a loan, you can come back to Credible to find another lending option — which could be an advantage as your credit improves.

Pros

  • Soft credit check for preapproval process
  • Massive range of loan values, terms and rates
  • Helpful customer service team that can help you make wise choices
  • View multiple loan options before paying anything or committing

Cons

  • You’ll connect to a marketplace, not an individual lender
  • Approval requirements depend on the lender you select from the marketplace

5. Best for Consolidating Debt: Upstart

Upstart is a lender that makes customer support easy by offering a page on its website on loan information and customer service. The lender allows you to access cash with no minimum credit score, which is perfect for those who have experienced bankruptcy.

You can borrow up to $50,000, but remember that your borrowing power changes based on your credit score, the recency of your bankruptcy and other issues that are addressed on the application.

Pros

  • No prepayment fees
  • Soft credit checks for eligibility
  • Flexible payment options
  • Can get funding within one business day
  • Excellent option for those with low credit

Cons

  • Cannot take out a joint loan or have a co-signer
  • Must pay an origination fee
  • Limited loan term options

Types of Personal Loans for Bankruptcy

The bankruptcy process begins when you file for bankruptcy and ends when your debt is discharged or paid off. Even after all your debts have been paid off, bankruptcy filings can stay on your credit report for years. 

A Chapter 7 bankruptcy entails selling your assets to pay off debt and will usually not involve a payment plan. This kind of bankruptcy is typically resolved in a few months but will stay on your credit report for at least seven years. 

Chapter 13 bankruptcy usually involves a payment plan. Chapter 13 bankruptcy can stay on your credit report for up to 10 years or longer in certain instances. 

It’s rare for anyone to be able to take out a personal loan while their bankruptcy case is ongoing and debts have not been discharged. The reason for this is intuitive. You shouldn’t be able to take on new debt if you still owe money. 

There may be some exceptions to the rule. In certain states, you may be able to take out a personal loan while your case is ongoing with special approval from a judge. It’s a good idea to consult with a bankruptcy attorney about your options. 

Once your debts have been discharged and your bankruptcy case is closed, it’s time to take a look at your credit report. Your credit report might keep you from securing a personal loan. It might help to wait at least a year or two after your debts have been discharged to apply for a personal loan. 

If you’re feeling it may be time to start borrowing again or that you have a good shot at qualifying for a loan, take a look at the most common types of personal loans for bankruptcy. 

Secured Loans

A secured loan is a loan backed by collateral. Collateral can be anything you own that is valuable, including your home, car, jewelry or art. 

You’ll need to agree to sign over the asset and give it to the lender if you are unable to pay the loan. Remember that secured loans can be dangerous. You risk losing the asset you’ve put up for collateral if you can’t meet the terms of the loan.  

Unsecured Loans

Unsecured loans are loans that do not require you to put up collateral in exchange for borrowing money. Unsecured loans are assessed based on your credit history. If you still have a bankruptcy filing on your credit report it may be more difficult for you to be approved for an unsecured loan. If you are approved, you may face fees or high interest rates.  

Fixed-Rate Loans

You’ll almost always need to pay some form of interest whenever you borrow money. If you’ve been approved for a fixed-rate loan, the interest rate you are being charged will remain the same for the duration of the loan. Mortgages typically have fixed rates. 

Personal Rate Loans

Personal rate loans are typically unsecured, fixed-rate loans that need to be paid over a certain period. You’re typically free to spend the money from a personal loan in any way you wish. However, if you have poor credit it may be difficult to secure this type of loan. 

Personal Loan Requirements and Criteria

Different lenders have different requirements. You must meet certain criteria.

If you have a bankruptcy filing on your credit history but are doing well in other required areas, it will help your chances of approval. Take a look at some of the most common personal loan requirements and criteria:

  • Credit report
  • Payment history
  • Debt-to-income ratio
  • Income

Personal Loan Considerations

A bankruptcy filing will likely make it difficult to secure a personal loan. You may have to agree to higher interest rates or put up some of your assets for collateral. 

Another option is to seek out credit-builder loans. Credit-builder loans are designed specifically for people with bad credit. It can give you access to money and help you rebuild your credit. 

If you decide to apply for a credit-builder loan or another loan designed for people with poor credit, remember to investigate the lender thoroughly. It’s best to borrow money from legitimate financial institutions or banks. Find programs that have a track record of helping people rebuild their credit and offer affordable interest rates. It’s also important to understand the terms you are agreeing to. It’s easy to fall victim to predatory lenders looking to take advantage of your situation. 

Predatory loans are designed to benefit the lender at your expense. They can come with high interest rates or other unfavorable terms that can make them difficult to repay. You risk getting caught in a debt cycle or further harming your credit score. 

The best way to avoid predatory loans is to only work with licensed lenders. Avoid lenders that sound too good to be true, rush you to sign, offer packaged services or have blank spaces in important documents. 

Personal Loans vs. Credit Cards

Personal loans offer a lump sum of money for a fixed interest rate and fixed payment period. Credit cards can have variable interest rates and often come with higher interest rates than personal loans. 

While personal loans need to be paid off by a set date, credit cards offer more flexibility. You can continue to use credit so long as you continue to make payments on your balance. Either can be a viable option if you need cash. However, you are much more likely to fall into debt when you rack up a balance on your credit card than if you were to take out a personal loan. 

Personal Loans After Bankruptcy

Finances can feel personal after bankruptcy. And getting approved for a personal loan while you still have a bankruptcy filing on your credit report can be challenging but not impossible. Your bankruptcy filing will have less of an impact on your credit score as more time goes by. Shop for different lenders, and stay away from predatory lenders at all costs. 

Start with Benzinga’s recommended lenders to find a personal loan after bankruptcy today.

Frequently Asked Questions

Q

Can you get a personal loan after filing for bankruptcy?

A

The process for getting a personal loan after filing for bankruptcy is difficult, and you’ll need to be prepared to pay high rates. Generally, smaller, short-term loans are best to help you get back on your feet.

Q

How long after bankruptcy can I borrow money?

A

For the best rates and experience, it’s best to wait seven to 10 years until the bankruptcy falls off your credit report. Otherwise, your options will be limited.

Q

How many points will your credit score drop with bankruptcy?

A

Once you file for bankruptcy, you can expect your credit score to drop at least 200 points, but the exact value will vary based on your circumstances.

Q

How fast can you rebuild credit after bankruptcy?

A

With the right steps and discipline, you can rebuild your credit score to 700 or more within two years of declaring bankruptcy.

About Rebekah Brately

Rebekah Brately is an investment writer passionate about helping people learn more about how to grow their wealth. She has more than 12 years of writing experience, focused on technology, travel, family and finance. Her work has been published in Benzinga, Hearst Bay Area, FreightWaves and Dallas Observer publications.