Can I get a loan after bankruptcy?
It may be necessary to seek a loan after bankruptcy. It's a fact of life that we can't always pay cash for a new car, house or other such necessity.
A question that I am often asked is "Can I get a loan after bankruptcy?". The answer, in short is yes!
If you do need a loan, it is important to know how to get the best rates and what you can do to improve your chances of a successful application.
A Loan after Bankruptcy discharge
There are two types of loan that can be applied for after bankruptcy.
An unsecured loan is unlikely, yet possible. Interest rates will be high.
Obtaining a secured loan after discharge from bankruptcy is easier due to the security you give. Examples include:
- A car loan, where the car is used as security.
- A mortgage, where the house is used as security.
- A bankruptcy home improvement loan, where the house is used as security.
This is because, as a discharged bankrupt, you will be considered higher risk. Security reduces the risk to the lender as they can sell the property to recover the loan if you cannot repay.
Is a loan straight after bankruptcy expensive?
You will definitely pay more interest than with a standard loan. Again, this is because you present a higher risk to the lender.
Arrangement fees may also be higher and there may be redemption penalties.
How can I get better rates?
With a greater amount of equity available as security you will be able to achieve a better deal in terms of lower interest rates and redemption penalties.
You can introduce equity by putting a deposit on the purchase. The total value of the asset will then be greater than the amount you have borrowed. Hence, the risk to the lender is reduced.
