It’s a normal question may ask when you are looking for financing.
If you want a fresh start, a past bankruptcy need not be a life sentence.
It’s possible to get approved for a business loan after a bankruptcy.
The thing is that it will require you to put together a strategy and expend extra effort.
Also, it may take a while and can involve a series of baby steps, but in time it’s possible to overcome the effects of bankruptcy on your financial prospects.
We have put together some information for you so, read on to find out how you can navigate the pitfalls of getting a loan with bad credit scores and bankruptcy.
Can you get a loan after bankruptcy?
The answer is yes! You can, but you will have to declare your bankruptcy by law if you apply for credit of more than £500.
It can be very hard to get bankruptcy loans, and you would not be allowed to take out credit when you are bankrupt.
Whilst it is not impossible to borrow money after bankruptcy, you will have to declare it to lenders for a time of up to 12 months, or up to your bankruptcy has been discharged.
Besides, bankruptcy will remain on your credit file for up to six years, which means you’ll struggle within that period of time as you’ll be seen as less creditworthy.
How does bankruptcy impact your credit?
Bankruptcy will automatically have a negative effect on your credit scores.
If you are in debt and not able to keep making monthly payments, then you are likely to see your credit score drop.
After you’ve been declared bankrupt your credit score will usually reflect this, so be prepared to have a bad or poor credit score.
This can make it much harder to be accepted for any sort of credit, especially for any amount over £500.
Loans after a bankruptcy discharge
As just mentioned above, bankruptcy will still have a serious impact on your credit scores for the next six years after discharge.
Bankruptcy and student loans or personal loans will be hard things to juggle with.
Securing a student loan or some other type of loan isn’t impossible after those six years, although there can be a much narrower choice available to you.
You are only likely to be able to borrow small amounts.
Interest rates for you will be higher than the person who has never been bankrupt.
Due to bankruptcy mark on your record, high street banks are likely to refuse to lend you even after you’ve been discharged from bankruptcy.
But there’s good news; also, there are lenders who specialize in lending to people who have a bad credit history, including bankruptcy loans and bankruptcy student loans.
Besides, a new bank account must be set up if you want to apply for a loan after bankruptcy.
High street banks offer special accounts for individuals with a bad credit score.
Will it be hard to get a mortgage with the bad credit?
The mortgage is usually the largest amount you’ll borrow in your lifetime.
And since you’ll have declared your bankruptcy to the lender, you’ll most likely be rejected by most mortgage provides.
But no worries because there are specialist mortgage providers who allow people with bad credit score to get a mortgage, with a higher interest rate.
Therefore, you may need to make enquiries as to whether they would also accept previously bankrupt customers.
That could depend on how long ago the declaration of bankruptcy was made, so it’s always worth checking.
Alternatively, you’ll need to build up your credit score and wait for the bankruptcy to vanish from your credit file after six years.
Whilst that can take a long time, it is the best way of getting a reasonable interest rate on a mortgage deal.
That means you can make affordable monthly payments without building up any future debt.
How can you repair your credit history?
There are some ways to build up your credit score again, which is worth doing as you near the end of your six-year bankruptcy period.
This will be helpful, especially if you plan on applying for a large personal loan or applying for a mortgage.
Try performing below methods to make improvements to your credit score:
- Check your credit report: this will give you an indication of what your credit score is and how you can make quick fixes to boost your credit score. Many companies offer free 30 day trial.
- Register to vote: If you haven’t done this already, registering to vote at your permanent address will improve the credit score, and you will be seen as more creditworthy.
- Disassociate yourself from people or addresses: If you are associated with someone who has a bad credit score at a previous address or through a joint account, your score can also be affected.
- Take a credit builder card: If you spend a small amount and return the balance to £0 every month to ensure you are not paying any interest, you will gradually build your credit score up.
- Take a credit builder loan: This is a way of building your credit score over the course of 12 months and saving money. Choose an affordable amount of money to save, and it will be treated like a loan you slowly pay off, with improving your credit score.
Generally, courts, insolvency service, and other official bodies will not provide guidance regarding the best approach. So, it’s always beneficial to hire an accountant or financial advisor to obtain professional advice regarding bankruptcy loans and other debt management options.