If you want to qualify for a personal loan after bankruptcy there are four key areas that will determine how successful you are:

1) Your credit score

2) Collateral

3) Existing debt

4) Time

Let’s look at each factor in more detail and how they can help you increase your chances of qualifying for a personal loan after bankruptcy:

1) Credit score: In order to qualify for a personal loan after bankruptcy you will need to meet the lender’s minimum credit score criteria, provided the lender extends loans to individuals with a recent bankruptcy. You’ll want to find out before applying for a loan: Simply ask the lender if they consider applicants with a bankruptcy on their credit report.

Let’s suppose the lender does. How can you increase your credit score enough to qualify for a personal loan after bankruptcy?

The first step is to order copies of your credit reports from the three major credit reporting agencies (Experian, Equifax, and Trans Union). Next, make sure any inaccurate or obsolete negative information on your credit reports is removed or updated. I go into detail on this in After Bankruptcy Credit Solutions. I also explain how to legally add positive lines of credit to your credit reports, which is a very powerful way to increase your credit score - but I’ll save that for another article.

2) Collateral: Another major factor in obtaining a personal loan after bankruptcy is how much collateral you have. Why? Because if a lender has collateral that they can go after (i.e., equity in your home) should you default on the loan, that reduces their risk dramatically. So if you can provide collateral to the lender, it can increase your chances of qualifying for a personal loan after bankruptcy.

3) Existing debt: You don’t want to have too much debt when you apply for a personal loan after bankruptcy. If you do, the lender may feel you don’t have the capacity (enough income) to cover the loan payment, because you have too many other monthly expenses to pay (i.e., credit cards, auto payment, etc.) - as a result you could get turned for a personal loan after bankruptcy.

On that note, find out if the lender has a minimum income requirement, or debt-to-income ratio you need to meet. If they do, make sure you meet their minimum requirement before you apply for the loan.

4) Time: It’s been said that “time heals all wounds” - well, when it comes to obtaining a personal loan after bankruptcy this can certainly be true if you’ve developed a positive payment history since your bankruptcy.

When a lender is deciding whether or not to extend you a personal loan after bankruptcy, your credit report will play a major role. Generally speaking, if your credit report reflects a positive payment history for at least two years since your bankruptcy, it will certainly help.

We have looked at the four major factors that will determine whether or not you qualify for a personal loan after bankruptcy: Your credit score, collateral, existing debt, and time. To the extent you can strengthen each one of these you increase your chances of being approved for a personal loan after bankruptcy.

Even if you can’t qualify for a personal loan after bankruptcy immediately, don’t be discouraged! Remember, time can heal all wounds when it comes to qualifying for a personal loan after bankruptcy. Just make sure to focus on increasing your credit score, pay your existing bills on time, don’t take on too much debt, and build up your net worth.

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Copyright © 2006 Innovative Solutions Publishing, Inc. All rights reserved.

The company and product/service names referenced in this article are the trademarks, registered trademarks or service marks of their respective owners. None of the owners have sponsored or endorsed this article.

DISCLAIMER:

This information is designed to provide only a general overview of the subject matter herein.

This information is provided with the understanding that neither the publisher nor author is engaged in rendering legal, accounting or other professional advice. If legal or other expert assistance is required, the services of a professional should be sought.

Neither the publisher nor author shall be liable for any loss or damages, including but not limited to special, consequential, incidental or other damages, caused by the information contained herein.

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R. Lawrence Anderson is author of After Bankruptcy Credit Solutions, which shows individuals how to qualify for credit and loans after bankruptcy. For details visit: http://www.bankruptcy-credit-solutions.com

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You see, by presenting collateral, you are balancing out the fact that you are unemployed and have lost your steady income. Essentially, when you apply for a loan for unemployed and offer your home as collateral, you are basically telling the lender, ok if I default on this loan, you can have my home. The equity within your home is how the value of the loan is determined. Basically, you will not ever get more than your home is worth in fair market value, or the price that the home would likely sell for if placed on the market. A home equity loan is one of the loan types that many people seeking loans for unemployed look for.

For the unemployed, a home equity loan is the best resource, which is also cheaper than other sources of finance. In general, a lender will have the understanding that a borrower would not risk their home, thus have a better chance of retrieving the money loaned. If you were to take a loan for unemployed and default on the loan, you would lose your home, which no person wants in life. Therefore, the lenders have a security net when providing loans for unemployed, with a home equity loan, in the fact that you are putting your own home at risk, if you fail to make timely payments.

A home equity loan and how the loan is used should be carefully considered. A major determining factor of just how the money is used and how quickly, is how long you could be unemployed. If you are only temporarily unemployed such as with a season position or temporary lay off, you know that you will have a steady income streaming in shortly. Therefore, you can spend the money as necessary, making sure you have enough to make it through the unemployment period.

However, if you simply do not know how long you will be unemployed and see no solution in sight, you might want to take extreme caution with the money. There are two general forms of loans and these are called:

Credit Lines
Installment

Credit lines prove very beneficial, especially when you only intend to obtain the loan for unemployed for a short period of time. A credit line, unlike an installment loan, charges interest only on the money withdrawn and used. Whereas an installment loan, charges interest on the entire loan amount.

There are many ways that, as an unemployed person, you can work to repay the loan for unemployed. In general, if you are receiving unemployment from the state in which you live, you could use that to make the payments. It is important that you only borrow what you know you can afford, if you take a loan for unemployed that is of a high amount, you may find it difficult to pay back and maintain your household expenses at the same time. This scenario would cause a great deal of backlash and could cause you to sink into a vast amount of debt.

Ken Charnley is a personal finance publisher whose website http://www.online-loans-pro.com/ is dedicated to quality information on online loans. For all your online loan needs visit and Apply for Unemployed Loans Online

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