Getting a secured loan after bankruptcy

Getting a secured loan after bankruptcy can be hard, but it's not out of reach. Bankruptcy impacts your credit score, making you seem like a higher risk to lenders. However, applying for a loan with collateral might improve your chances of getting approved.

What is bankruptcy?

Bankruptcy is a legal process that people or businesses can use when they can’t manage their debt. It’s one of many debt solutions, often considered when other options, like repayment plans or negotiations, don’t work.

To file for bankruptcy, the person or business submits a petition to the court. The court then issues a bankruptcy order, officially declaring them bankrupt. Once this happens, their debt payments are frozen, and a trustee takes over handling the debts.

How bankruptcy affects your credit score

Bankruptcy can have a major, long-term effect on your credit score. The impact depends on the type of bankruptcy, how it’s reported, and your credit history before filing. Overall, it’s a negative mark on your credit report and usually lowers your score.

• Credit score drop: Filing for bankruptcy often causes a large drop in your credit score. The size of the drop depends on your previous credit history and the type of bankruptcy.

• Duration on credit report: Bankruptcy stays on your credit report for at least 6 years, even though the bankruptcy itself lasts only 12 months.

• Impact on creditworthiness: Lenders see bankruptcy as a sign that you're struggling to manage your finances. While it becomes less of an issue as time passes, it can still be hard to get credit. When you do, the terms might not be as good.

• Rebuilding credit: You can rebuild your credit score after bankruptcy. This can involve getting a credit card, paying on time, and showing responsible financial behaviour. Over time, these steps can reduce the effects of bankruptcy on your score.

Applying for a secured loan after bankruptcy

After you're discharged from bankruptcy, it might still be hard to get loans from high street mortgage lenders. You might need help from a specialist lender who works with people with bad credit. The longer it's been since your bankruptcy, the easier it gets to qualify for a secured loan.

Some lenders won’t approve anyone who has gone through bankruptcy, but most will expect you to be discharged for at least 3 years.

Here are steps to follow when applying for a secured loan:

• Be prepared: Have important documents ready, like your bankruptcy information, proof of income, property details, and ID.
• Be honest: Lenders will ask about your past and current finances, so be truthful so they can help you better.
• Don’t borrow too much: Only agree to a loan that you can comfortably repay each month, even if a lender offers more.

Summary

Getting a secured loan after bankruptcy can be hard, but it's possible. You may need to talk to a specialist lender like us, who can help people with past bankruptcies. You can reach out by submitting an enquiry, calling on 0800 980 6237, or starting a live chat with our team.

Remember, bankruptcy doesn’t affect your credit score forever. As you show responsible financial habits and handle new credit well, the impact will fade. Over time, lenders may be more willing to offer you credit as they see your finances improving.

If you are thinking of consolidating existing borrowing you should be aware that if you are extending the term of the debt you may be increasing the total amount you repay. All loans are subject to status, and appropriate lending terms.

THINK CAREFULLY BEFORE SECURING OTHER DEBTS AGAINST YOUR HOME. YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON A MORTGAGE OR ANY OTHER DEBT SECURED ON IT.