Being in bankruptcy is tough enough, but continuing to struggle with your finances can make things even more difficult. If you’re in need of financing, you might find getting a loan during or after bankruptcy challenging, but not necessarily impossible.
While traditional lenders may be more hesitant to work with borrowers in bankruptcy, private lenders and secured loan options may be available to help you get the financial assistance you need. Here’s what you need to know before shopping around.
Key Points
- Getting a loan while in bankruptcy is very difficult, but possible if you apply with a private lender.
- If you manage to get a bankruptcy loan, be prepared to pay much higher interest rates and settle for lower loan amounts.
- Your best bet is to wait until long after your bankruptcy is discharged to apply for a loan.
- Waiting until after bankruptcy to take out a loan will give you some time to rebuild your credit score so you can improve your chances of approval at a lower rate.
Can You Get A Loan While In Bankruptcy?
There’s no rule that legally prohibits consumers from applying for a loan while in bankruptcy in Canada. However, it’s very difficult, especially if the bankruptcy is not yet complete.
Lenders will typically require you to disclose your bankruptcy status, and some explicitly state that you must not be in bankruptcy to apply for a loan. This is especially true if you’re requesting a large loan amount or applying with a bank.
That said, you may be able to secure a loan if you provide collateral and/or work with a private lender, as they are not bound by the tight regulations that federally regulated banks are.
While it may be difficult to get a loan during bankruptcy, lenders are often more willing to lend money to those who have already been discharged.
Can You Get A Bankruptcy Loan After Being Discharged?
Yes, you can get a bankruptcy loan after being discharged. In fact, it’s best to wait until your bankruptcy is complete before applying for a loan, as mentioned. This will improve your chances of loan approval.
After your bankruptcy is discharged, you’ll have a chance to start rebuilding your credit. This is key to getting approved for a loan after bankruptcy. By taking the steps to build your credit, you’ll have a better chance of getting a loan with a competitive rate and favourable terms.
See How Much Your Qualify For
Payday Loans After Bankruptcy
Payday loans are one of the easiest loans to qualify for after bankruptcy. One of the main reasons is that payday lenders don’t check your credit. They mainly base their approval on your income level.
While these are extremely accessible loans, it’s recommended that you don’t apply for a payday loan after bankruptcy for several reasons:
- Extremely High Interest Rates: Payday loans come with very high interest rates, making them very expensive. You’ll be adding more debt in the form of interest, which could put you at risk of winding up in the same situation that caused you to file for bankruptcy in the first place.
- Difficult To Pay Back So Quickly: Because payday loans must be repaid in a very short period of time in one lump sum, they can be extremely difficult to repay in full. This could put you at risk of ending up in a dangerous cycle of debt.
- Risk Of Negative Impact On Credit: If you miss your payments, you could wind up in default. If this happens, the lender may get a collection agency to help recoup what you owe, which could be noted on your credit report and further damage your credit.
Personal Loans After Bankruptcy
Once your bankruptcy has been discharged, you may be able to secure a personal loan. Instead of focusing on your credit score and prior debts, these bad credit lenders will be more concerned about your income and whether you can repay them on time.
Before you apply for a personal loan after bankruptcy, keep the following factors in mind:
- Alternative lenders may charge higher interest rates and fees.
- You may be asked to provide collateral or a cosigner as loan security.
- Predatory lenders lurk in the private lending space due to less regulatory oversight.
Where Can You Get Bankruptcy Loans?
Bank loans are likely unattainable right after bankruptcy due to their stringent underwriting standards. If you want to secure a loan, you are most likely going to have to rely on private lenders, as mentioned.
While banks place emphasis on your credit score in assessing your reliability, private lenders balance their approval on other factors when deciding whether they want to lend to you, including:
- Income
- Job stability
- Debt-to-income ratio
Best Private Personal Loan Lenders
Filters
- Amount
- Up to $35,000
- Rate
- 9.99% – 34.95%
- Term
- 9 – 78 Months
- Amount
- Up to $60,000†
- Rate
- 19.99% – 34.99%*
- Term
- 6 – 120 months
- Amount
- Up to $10,000
- Rate
- Varies by product
- Term
- Varies by product
Do You Qualify For A Bankruptcy Loan?
Bankruptcy can do serious long-term damage to your credit report and credit score. Not only can a record of it appear in your credit history for up to seven years, but all accounts that are associated with the process will also receive R9 credit ratings.
Fortunately, you can still qualify for a loan with these tips:
Rebuild Your Credit
Rebuilding your credit after bankruptcy takes time, but it’s not impossible. A secured credit card or a credit builder loan are two ways that can help you build credit:
- Secured Credit Cards: With a secured credit card, every payment you make will be reported to the credit bureaus, which will help build your credit history. Simply make a deposit, which serves as your credit limit, then use the card as you would a conventional unsecured card.
- Credit Builder Loans: With a credit builder loan, you get no money upfront. Instead, you’ll make payments to the lender for a period of time, each of which will be reported to the credit bureaus to help you build positive credit. At the end of the term, you receive all of your money back (minus any fees and interest charged).
Learn more: How To Rebuild Your Credit After Bankruptcy
Apply With A Lender That Does Not Require Credit Checks
Traditional lenders typically conduct credit checks as part of the loan application and approval process. However, if you have bad credit as a result of a recent bankruptcy, these credit checks could stand in the way of loan approval.
Instead, consider applying for a loan from a lender that does not perform credit checks. Alternative lenders, private lenders, and payday loan lenders typically do not require credit inquiries as part of the vetting process. However, remember that these lenders typically charge much higher interest on their loans.
Learn more: Best No Credit Check Loans
Get A Co-Signer
Adding a reliable co-signer to the loan can help your creditworthiness. A co-signer is someone who makes a legally binding promise to repay your loan if you default on it. This reduces your risk as a borrower, especially if the co-signer has great finances and credit.
Having a co-signer can also lead to lower interest rates and better loan terms. However, make sure they are someone you trust and have a good relationship with.
Wait Until You’re Discharged
As mentioned earlier, your best bet is to wait until after your bankruptcy is complete before applying for a loan, rather than applying while you’re still in the midst. This will give you a chance to rebuild your credit score before applying, which can improve your odds of approval. Plus, some lenders may not even consider your loan application until your bankruptcy is discharged.
Other Ways You Can Access Cash
Filing for bankruptcy can certainly stand in the way of accessing financing products. If you’re struggling to secure a loan, there are a handful of options available that are relatively easy to secure without the need for good credit:
- Bree: Bree is a financial service that offers instant cash advances of up to $500 with no credit checks, no fees, and no interest.
- Nyble: Nyble is a financial platform that offers small interest-free credit lines of up to $250, with no credit check required. You can also use your line of credit to build positive credit.
- BNPL: Buy Now Pay Later (BNPL) is a type of short-term financing option when buying expensive items. At the point-of-sale, you can split your purchase into smaller installments over time, with no credit checks required and often with no interest.
Can You Get A Credit Card After Bankruptcy?
You may have trouble getting a conventional unsecured credit card after bankruptcy. That’s because your credit score will take a hit and your credit report will have a note about your bankruptcy.
Fortunately, there are a couple of options available that are similar to regular credit cards but are much easier for bad credit borrowers to obtain:
Prepaid Credit Cards
Prepaid credit cards are suitable for bad credit borrowers after bankruptcy because they don’t require a credit check. They also help you avoid additional debt since you’re only able to spend what you load onto the card. You can use the card to make purchases like a credit card without putting you into further debt.
Secured Credit Cards
Secured credit cards are great for bad credit borrowers after bankruptcy because they require a security deposit upfront, so you’re not actually spending on credit and won’t accumulate more debt. Plus, your payments are reported to the credit bureaus, which can help you rebuild credit responsibly.
Annual Fee Purchase Interest Rates Min. Deposit 
Secured Neo Mastercard$5/monthly – 19.99% – 29.99%
– QC: 19.99% – 24.99% $50 
Secured Tims® Mastercard$0 – 20.99% – 26.99%
– QC: 20.99% – 24.99% $50 
Home Trust Secured Visa Card0$ or $59 – 19.99% (no annual fee)
– 14.90% (with annual fee) $500 
Vancity enviro™ Secured Visa* card$0 – $395 11.25% or 19.50 % $500
| Annual Fee | Purchase Interest Rates | Min. Deposit | |
Secured Neo Mastercard | $5/monthly | – 19.99% – 29.99% – QC: 19.99% – 24.99% | $50 |
Secured Tims® Mastercard | $0 | – 20.99% – 26.99% – QC: 20.99% – 24.99% | $50 |
Home Trust Secured Visa Card | 0$ or $59 | – 19.99% (no annual fee) – 14.90% (with annual fee) | $500 |
Vancity enviro™ Secured Visa* card | $0 – $395 | 11.25% or 19.50 % | $500 |
Can You Get A Mortgage After Bankruptcy?
Getting a mortgage after bankruptcy can be difficult. Luckily, there are a few factors that lenders consider that may persuade them into lending you a mortgage:
- An Improved Credit Score – If you’ve improved your credit since your bankruptcy discharge, your lender will see that as a positive. A lender is more likely to give you a mortgage if they can see you already managing new credit responsibly.
- A High Down Payment – Since your bankruptcy poses more risk for a lender to give you a loan, it would help to have a higher down payment for your property.
If you can’t qualify for a mortgage with a Big Bank, you can opt for an alternative lender (“B-lender”) who has more flexible requirements. However, these lenders tend to charge higher rates and may come with additional fees.
Can You Get A Car Loan After Bankruptcy?
In Canada, there are many alternative lenders and vehicle dealerships that offer bad credit car loans to drivers with previous bankruptcies.
In fact, since most car loans are secured against the vehicle itself until you’ve paid it off, you may have an even greater chance of being approved than you would with some unsecured personal loans.
Plus, if your lender/dealer reports to Equifax and/or TransUnion, any complete, timely payments should gradually heal your credit. Some lenders and dealerships will also allow you to refinance your loan if you can’t afford your current repayment plan.
Things to know about bad credit car loans:
- Higher rates and more fees can apply (dealership fees, etc.)
- Late, incomplete and missed payments could further damage your credit
- Defaulting on your loan can lead to your car being repossessed and resold
Learn more: Car Loans After Bankruptcy
Tips On Managing Your Bankruptcy Loans
When you get a bankruptcy loan, be sure to monitor your credit, save, budget and be patient with the results. Building your credit will take time after bankruptcy.
- Monitor Your Credit – You can check your credit score for free through numerous sources, including Loans Canada’s CompareHub.
- Save And Budget – Reduce your unnecessary expenses and tally up your important ones so that you don’t make the same mistakes twice. Also, be sure to build an emergency fund to cover any payments that your income can’t support.
- Be Patient – Bankruptcy comes with hefty financial consequences that can be hard to recover from. Time is your friend when it comes to financially recovering from bankruptcy. Building credit doesn’t happen overnight – a steady history of repaying debts will help you build back your credit. Additionally, the older your bankruptcy date is, the better. If a few years have passed since the bankruptcy (as opposed to a few weeks), you may seem more reliable to a lender.
Should You Get A Loan After Bankruptcy?
Taking out a loan after bankruptcy isn’t the best idea. Instead, you should use this time to focus on rebuilding your credit and growing your savings. If you’re finding it difficult to cover your expenses, then consider the following:
- Make a budget
- Cut back on spending
- Look at ways to save
- Seek out financial assistance from an expert
| Budgeting Tools | Learn more |
| Government Assistance | Learn more |
| Saving Tips | Learn more |
| Living Within Your Means | Learn more |
Bottom Line
Remember, bankruptcy is not the end of the world, it is a debt relief program. And in some ways, it’s a second chance at life. Once discharged, one of your top goals should be to start rebuilding your credit, rather than quickly jump back into debt by applying for a loan. By taking the time to rebuild your credit and avoiding new debt, you’ll be able to access the loans you may need in the future.
