When Can I Get a Loan Again After Declaring Bankruptcy?

Bankruptcy Articles > Article: When Can I Get a Loan Again After Declaring Bankruptcy?

You can begin borrowing again immediately. Bankrupt parties can get a loan, but they cannot exceed the monetary limit provided by the ITSA.

One of the first things a bankrupt person should do is try to rebuild their credit. There are several ways they can accomplish this task:

1. Get a card with a high-rate

The bankrupt party's primary goal is to prove that they should be trusted with borrowed money. This will help them rebuild their damaged credit rating. However, bankrupt parties should not expect to receive similar credit offers after a bankruptcy than they did before the bankruptcy.

People who have declared bankruptcy should also be aware that the issuer has full control over the approval of the bankrupt party. The issuer will decide when the bankrupt party can be approved for a credit card. Once the issuer is ready to give the bankrupt party a credit card, the bankrupt party might be surprised by the high interest rates, large fees, and limited lines of credit they receive.

Remember that being turned down for a credit card hurts your credit rating too. Shortly after filing bankruptcy, applying for 'bad' credit cards makes sense. Bankrupt parties do not want to be continuously turned down for offers that are too out of their reach. By applying for 'bad' credit cards, they are more likely to be approved for the card and less likely to take any hits for being unqualified for the card.

Bankrupt parties should be advised to read the available literature on a credit card carefully, before applying. Be on the lookout for:

  • Variable rates (when can they raise your rate and by how much?)
  • Low fees (again, check out the interest rate)

Anyone uncomfortable with determining whether an offer is fair should consult a reputable credit-counseling agency.

2. Get a secured credit card

Secured credit cards are cards that require applicants to open a savings account when opening the line of credit. The applicant is required to place enough money in the account to cover the credit limit. This protects the issuer in case the cardholder cannot pay their balance. This also protects the cardholder from defaulting on their payments.

Consumers should be aware that some secured credit card companies do not report payment history to the credit bureaus. There is no benefit in having one of these cards if the payment history is not being reported to a credit bureau; your rating is remaining stagnant. Unfortunately, a secured credit card, when reported, can also alert future creditors of a troubled credit history if the card is designated as secured.

  • Make sure the secured credit card is being reported to the credit bureaus.
  • Make sure the card is NOT reported as a secured credit card.

Ideally, you can find a secured credit card that will report to the credit bureau without specifying that the payments were made on a secured card.

3. Consider going without credit... period.

This strategy might be considered a little extreme. However, some consumers might benefit from leaving the world of credit behind after their bankruptcy. There are things that will be difficult without a line of credit, renting a car and purchasing a plane ticket are two examples. However, ask yourself if you really need a line of credit to survive? After a bankruptcy, you have the opportunity to view your credit as a clean slate. Although you might not have some of the conveniences you are used to having, the world will still turn.

If you do not like this option, you should still think seriously before taking on any new line of credit. Consumers who have gone through a bankruptcy should carefully consider their options so they do not wind up in trouble again.

4. Open a CD

A CD (certificate of deposit) is an account in which the owner deposits money and does not withdrawing any for a specific amount of time. Interest is earned while the money sits in the account. For this to be effective, the account should go untouched for a reasonable amount of time (a year minimum).

One way to boost your credit rating is to apply for a small personal loan. Once you are approved, you can deposit the money into the CD. Then, be sure to make the loan payments on time. By the end of the year, (at the maturation of the CD account) the account holder will have improved their credit score (by making payments on time) and earned money (interest accrued by CD.)

Be aware that borrowing money, purchasing goods with credit, or incurring credit exceeding the monetary limit is an offence if you have not informed the creditor that you are bankrupt.

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