Getting a short term loan after bankruptcy

Bankruptcy doesn’t have to be the end of the road. Here’s how to get a loan after you’ve been declared bankrupt.

Getting a loan after bankruptcy How to get a loan

Warning: Late repayment can cause you serious money problems. For help, go to

Please note: High-cost short-term credit is unsuitable for sustained borrowing over long periods and would be expensive as a means of longer-term borrowing.

Can I get a short term loan while bankrupt?

Theoretically yes – it’s not illegal. You do however have to disclose that you are bankrupt if you apply for credit of more than £500. Below this amount, lenders may still ask during the application process, and you must answer truthfully. Lenders can also see if you have a bankruptcy on your credit report.

You’ll be extremely limited in terms of the lenders you can choose from, and the interest rates are likely to be close to – or right on – the legal maximum for high-cost short-term credit (0.8% per day).

If at all possible, wait until your bankruptcy is over before applying – high-cost short-term credit is extremely expensive. Applying for a loan when you’re in any challenging financial situation isn’t a decision that should be taken lightly, and this is especially true when you’re bankrupt. Consider why you’re taking out the loan and if there’s any other way you can pay for what you need, or if you can defer the expenditure.

Can I get a short term loan if I have a bankruptcy on my credit report?

Bankruptcy stays on your credit report for 6 years. Having a bankruptcy on your credit report may look bad to most traditional lenders, but lenders offering short term loans tend to be more lenient in their eligibility criteria, often focusing on an applicant’s ability to repay.

As your assets and income may have been affected by bankruptcy, deciding whether or not you can afford the repayments is an important consideration. What will your repayments be, and how will they work with your budget?

While it’s possible to get a loan if you’ve declared bankruptcy, it’s important that you don’t take out a loan you can’t afford, as this will likely cause you more financial difficulty.”

Chris Lilly, Finder money expert

What other types of bankruptcy loans are available?

If you’re in need of financing and have a bankruptcy listed on your credit report, these are some of the credit options that may be available to you:

  • Bad credit personal loan. Bad credit personal loans are available from certain lenders, some for large amounts up to £15,000.
  • Guarantor loan Applying with a guarantor who has good credit may increase your chances of approval.
  • Car finance. Secured loans can be easier to be approved for than unsecured loans, as they are less of a risk to a lender. You can consider a car loan with the vehicle as security.
  • Approved overdraft. Your current bank may be willing to approve you for an overdraft if you have a good history with the bank. This allows you to withdraw cash above your available balance.

How to get approved for a bankrupt loan

While there are lenders who will consider applicants who are in bankruptcy or who have previously been bankrupt, meeting the minimum eligibility criteria and filling out the application isn’t all it takes to be approved. Here are some of the factors lenders will consider when reviewing your application:

  1. Ability to manage your repayments. This is the main requirement lenders focus on when considering you for a loan. Does your income allow you to easily manage your repayments after taking into account your financial commitments?
  2. Your credit report. Bankruptcies affect your credit rating for up to 6 years. Lenders will take into account your history before and after bankruptcy and make a decision based on all the facts available.
  3. Employment. You may be required to be employed, although there are some unemployed loans available. Different lenders have different restrictions. Some might not consider you if you’re self-employed or work part-time. Check with the lender before applying.
  4. Income. How much do you earn? Lenders often have minimum income requirements in place. They may allow your income to be from employment and welfare or may need it to be solely from regular employment.
  5. Benefits. While you may still be considered for a loan if you receive benefits, lenders often have restrictions as to what percentage of your income can be made up of benefits. Usually, your loan repayments can’t exceed a certain percentage of your welfare income.

If you do decide to get a loan, pay it off on time! This will help rebuild your credit after bankruptcy, which in turn can mean you’ll have access to better rates down the road.

What about using a matching service?

You may wish to consider using a payday loan matching service. These generally use a soft credit search and a panel of lenders that they refer applicants to, so you’ll only have complete a single application form rather than having to go through the process several times with several different lenders.

Bottom line

Bankruptcy will harm your credit score, but it’s not necessarily the end of the road for your ability to be approved for a loan. Realistically, you’re likely to be charged interest at a significantly higher rate for the 6 years the bankruptcy affects your credit rating, and while you rebuild your credit score, however some specialist lenders will consider your application for credit.

Before you apply, check the eligibility criteria, and use a soft-search/eligibility-checker if the lender offers this facility (if it doesn’t perhaps call to discuss your situation). Above all, only apply for credit if you’re certain you can afford it.

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Frequently asked questions

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Tom Stelzer is a writer for Finder specialising in personal finance, including loans and credit, as well as small business and business loans. He has previously worked as a freelance writer covering entertainment, culture and football for publications like FourFourTwo and Man of Many. He has a Master of Media Arts and Production and Bachelor of Communications in Journalism from the University of Technology Sydney. See full bio

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