What Are Loans For Bankrupts? What Are They For?
A bankruptcy loan is a kind of payday advance product available to borrowers who are currently undergoing bankruptcy or have been discharged from bankruptcy. While it can be challenging to find a legitimate financial solution in such a situation, it is possible through reliable online lending platforms like WeLoans.
Unlike traditional creditors, lenders that provide online loan services on our platform will consider your application as long as you can show proof of your ability to repay. As this type of loan is considered high-risk, lenders typically limit the available lending amount and impose short repayment periods, from 2 weeks up to 12 months.
It's also important to note that if you borrow more than a certain threshold, you will be required to disclose your bankruptcy status as a borrower, as stipulated in the Bankruptcy Act of 1966.
What Are The Examples of Loans For Bankruptcy?
If you have small unforeseen expenses such as groceries or utilities and you're still waiting for your next paycheck, payday loans can give you access to cash even when you went bankrupt. Payday loans are small-amount loans with loan amounts usually capped at $2,000. This type of loan is unsecured so you don't need to worry about collateral to borrow.
During or after bankruptcy, you can try to qualify for a personal loan to rebuild your financial situation. The unsecured bad credit personal loan available on WeLoans is a long-term financial product with higher lending limits that are to be repaid in monthly instalments. You still have a big chance of approval for a personal loan if you have sufficient sources of income even if you have declared bankruptcy.
Auto Title Loans
While most bankruptcy loans are unsecured, auto title loans are secured by the title of the vehicle you own. The interest rate for these secured loans are generally lower, and the loan amount is typically based on the vehicle’s market value. Unlike unsecured personal loans or any other short-term loans without any collateral involved, you may lose possession of your car if you fail to repay your loans.
What Will Lenders Consider When Processing My Bankruptcy Loan Requests?
Employment criteria can vary from one lender to another but generally, you'll have a higher chance of approval if you are currently working full-time regardless of your bankruptcy history. Lenders would like to assess your repayment capacity as it affects your ability to pay your loan. But, some lenders may reject your application if you are self-employed or just working part-time due to your unstable employment status.
Most lenders set minimum income requirements for borrowers to qualify for a bankruptcy loan. Apart from that, lenders will also look at your sources of income. Some lenders will only consider borrowers with an income stream from working with an employer while others may consider those who receive government benefits or pensions as their source of regular cash flow.
Assets and properties
Your assets and properties could also help you get approved for a loan while being bankrupt. Not only can you use them to prove your repayment capacity, but they are also available for getting secured loans, one for which you need to offer collateral such as jewellery, a car or real estate. In case you default on your payments, the lender could seize your asset.
Potential Risks Involved When Getting Loans After Declaring Bankruptcy
While you may find many lenders offering loans for people with bankrupt records, not all of them are legitimate or reputable lenders. You should only apply for a loan with a licensed lender and you can avoid dealing with scrupulous lenders by checking ASIC's list of unlicensed businesses. You can also reach out to trustable platforms like WeLoans to find dependable licensed Australian direct lenders.
High fees, charges, and interest rates
Bankruptcy could significantly pull your credit score down for many years even after you are discharged. When your credit score is low, borrowers will generally see you as a high-risk borrower. As a result, bankruptcy loans typically have high-interest rates, fees and charges. Make sure to consider these borrowing costs in advance as they could be a debt trap in the long run.
High repayment pressure
Before you borrow money, you should consider how much you can afford to pay each month. Lenders charge hefty fees for late payments and this could increase repayment pressure. Most online lenders have a loan calculator on their website and you can use this to get an estimate of your monthly repayment to better lay out your financial plans.
Long-term impact and legal issues
Multiple bankruptcy loan applications over a short period can harm your credit profile. Moreover, there's a maximum limit on how much you can borrow until you are legally required by national regulations to disclose your bankruptcy to the lender. As of this writing, the threshold is $6,144.
Will Lenders Reject My Loan Request Due To My Bankruptcy Records?
Many of the lenders we are currently working with will not reject your application right away as they will consider your overall financial situation to assess your creditworthiness. However, there are possible reasons why lenders may reject your loan request:
If you are currently unemployed, there will be limited loan options available for you. Lenders will consider you as too risky of a borrower especially since you also declared bankruptcy. However, there are lenders in our network that provide loan services for unemployed borrowers. Your eligibility for a loan will depend on the lender's criteria and your current financial situation.
If you only receive Centrelink payments as opposed to income from full-time employment, you will likely not qualify for loan services online. Most lenders will evaluate the percentage of Centrelink benefits in your income, and they will not approve your application if your Centrelink benefits or other government benefits account for more than 50% of your net earnings.
Gambling website payment records
Lenders will require you to submit recent bank statements and check your transactions to determine if you are capable of repaying your loan. If lenders find out that you are making payments to gambling sites or similar suspicious platforms on a regular basis, this is a red flag for them, and you probably won’t get approved accordingly.