Financial recovery following bankruptcy can seem insurmountable, not to mention frustrating.

Bankruptcy can also leave a massive stain on your credit that can drastically limit your borrowing options. Fortunately, it's reparable, but it takes time, patience, and diligence.

Below is a step-by-step guide to rebuilding credit and securing personal loans as you grapple with plummeted credit scores, apprehensive lenders, and stricter loan terms.

As hopeless as things look right now, with the right strategies and resources, you can be back on your feet in no time."

Personal loans after bankruptcy: Impact, consequences, and considerations

Bankruptcy can certainly be an effective solution for people in extreme financial distress, but it’s not without cost. Declaring bankruptcy can significantly affect your ability to obtain credit because it signals to lenders that you have a history of failing to repay debts.

Here are some common ways declaring bankruptcy can impact your ability to land a personal loan.

Significant drop in credit score

Bankruptcy typically leads to a substantial drop in your credit score. Because lenders assess your credit score as part of the approval process, a lower score makes it more challenging to secure a loan.

Lender perception

All else being equal, lenders consider borrowers who have declared bankruptcy to be high-risk. A bankruptcy declaration is a red flag, implying you are less likely to repay your debt.

Lenders might decline your application or only approve you for a loan with less favorable terms. For example, some borrowers with a bankruptcy history might only be able to secure credit at a higher interest rate or only with a co-signer.


Many lenders are simply unwilling to provide a loan at all to someone with a history of bankruptcy, substantially lowering the loan offerings available. But there are other lenders who specialize in providing loans for people with poor credit.


Some banks may provide you with a loan only after a specific amount of time has passed since the bankruptcy declaration. For example, a lender might require that you wait three years following a Chapter 7 bankruptcy before your application will even be considered.


Lenders that provide loans to borrowers who’ve declared bankruptcy usually charge steeper fees and have more stringent terms. This can take different forms, such as:

  • Higher interest rates
  • More restrictive conditions
  • Smaller loan amounts
  • Additional fees
  • Shorter repayment periods

Secured vs. unsecured loans

Secured loans entail putting up collateral, like a savings account. If you miss payments, the lender can eventually secure repayment via your collateral.

For the lender, this means less risk. This is why secured loans typically have a lower interest rate than comparable unsecured ones. It’s also why, following bankruptcy, it’s easier to obtain a secured loan.

Tips to land personal loans after bankruptcy

Rebuild your credit health

It’s imperative that you begin rebuilding your credit health as quickly as possible following bankruptcy. This might include securing small loans, like a modest line of credit or a credit card with a low limit and making consistent, on time payments.

Being diligent and consistent about making payments and paying off debt demonstrates to lenders your financial responsibility and will ultimately help you land larger loans with better terms in the future.

Think of rebuilding your credit like rehabilitating after an injury.

If you severely hurt your knee playing tennis, you shouldn’t jump right back into competition. In fact, you probably wouldn’t be allowed to even if you wanted to. Instead, you’d be better off taking a disciplined and systematic approach to recovering.

Just as you wouldn’t run ten miles the day after hurting your knee, you wouldn’t apply for a $100K loan the day after declaring bankruptcy.

There are numerous ways to start rebuilding your credit fitness, such as:

  • Secured credit cards: Secured credit cards require deposits that typically match your credit limit. Using the card to make purchases and fully paying off the balance each month can help enhance your credit score.
  • Authorized user: If possible, become an authorized user on the credit card of a financially responsible family member. This can help you piggyback off their sound credit habits.
  • Credit builder loans: With credit builder loans, the loaned amount remains in a bank account while you make payments and ultimately build credit.

Review your credit report

Check your credit report and make sure it accurately shows a zero balance on any of the accounts that were included in the bankruptcy. If you identify errors, dispute them with the credit reporting agencies.

Stable income and co-signers

Showing a stable income can go a long way to improving your credit and securing a loan.

If available, consider using a co-signer with good credit for your loan application. A co-signer can substantially increase your odds of obtaining a personal loan.

Of course, be aware that if you default on the loan payments, your co-signer will be responsible for the debt.

Banks that work with bankruptcies for personal loans

Unfortunately, bankruptcy doesn’t make it easy to land a loan. Nevertheless, bankruptcy-friendly personal loans do exist.

Here are three favorite providers you can consider.

Upstart—Best overall personal loan provider

Upstart offers potential borrowers with a history of bankruptcy the opportunity to secure lending. Its fees tend to be high, but Upstart offers competitive interest rates and lending to borrowers with credit scores as low as 300.

  • APR: 5.2%-35.99%
  • Term lengths: 36 and 60 months
  • Loan amount: $1,000-$50,000
  • Minimum credit score: 300

OneMain Financial—Best lender with no credit score requirements

OneMain's interest rates aren’t as competitive as Upstart, but OneMain is willing to assess any potential borrower. If you have a low credit score, consider OneMain Financial.

  • APR: 18.00%-35.99%
  • Term lengths: 2 to 7 years
  • Loan amounts: $5,000-$100,000
  • Minimum credit score: No minimum

LendingClub—Best lender for quick funding

In need of cash right away? Check out LendingClub. Following approval, you can obtain your loan funding in as little as one day.

It doesn’t have the lowest credit requirements on the list, but LendingClub does offer joint application loans. This means you could be able to secure a loan with a co-signer you would otherwise have been denied had you applied on your own.

  • APR: 9.57%-35.99%
  • Term lengths: 36 to 60 months
  • Loan amounts: $1,000-$40,000
  • Minimum credit score: 600