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One of the common concerns that people have when considering pursuing personal bankruptcy is whether they will be able to get approved for bankruptcy loans. While getting a loan during bankruptcy may be difficult, lenders are often willing to lend money to people who have been discharged from bankruptcy. 

Can You Get A Bankruptcy Loan?

Getting approval for a loan requires a lot of research, documentation, and decent credit history. Add bankruptcy to the mix, and finding approval for a loan becomes even more difficult, as you will have a harder time qualifying. 

Experts recommend that you wait to build back your credit after bankruptcy before applying for a loan. That way you’ll have a better chance of getting bankruptcy loans. Failure to build your credit can result in higher interest rates and overall unattractive loan terms. Banks will be unlikely to lend to you, but you may have some luck with private lenders, who may accept you as a risky client in exchange for high-interest rates. 

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Types Of Bankruptcy Loans

Getting a loan after bankruptcy can be difficult due to the damage it does to your credit. However, you still have some options:

Can You Get A Credit Card After Bankruptcy?

Credit cards are normally easy to get, even if you don’t have a great income. However, you may have trouble finding lenders that will approve you if your credit score is still low and your bankruptcy hasn’t been removed from your credit report. That’s why secured credit cards can be incredibly useful. 

You may also be able to get a prepaid credit card, which you’ll have to consistently load money onto in order to use. This can help you control your spending while earning similar benefits to regular credit cards, like bonus points and cash back rewards.   

It can take about 1 – 2 years of responsible payments to start truly recovering from bankruptcy. Once your credit has improved and you’re considered a less risky client again, you may be able to convert your secured card to an unsecured one. As mentioned, your deposit should be returned as soon as you’ve dealt with any unpaid balances. 

Things to know about secured and prepaid credit cards:

  • Too many missed payments can lead to the loss of your deposit for secured credit cards.
  • Credit limits may not be as high as some unsecured credit cards.
  • Prepaid credit cards do not affect your credit report or credit score.

Where Can You Get A Secured Credit Card After Bankruptcy?

Annual FeeInterest RatesMin. Deposit
Neo Secured Credit$0- 19.99% - 26.99%
- QC: 19.99%-24.99%
$50
Capital One® Guaranteed Secured Mastercard®$5919.8%$75 or $300
Home Trust Secured Visa Card0$ or $59- 19.99% (no annual fee)
- 14.90% (with annual fee)
$500
Vancity enviro™ Secured Visa* card$0 - $39511.25% or 19.50 %$500
TD Cash Secured Credit Card$2927.74% variable APR$300

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 who has more flexible requirements. 

Can You Get Personal Bankruptcy Loans?

Even though your unsecured debts have been forgiven, bankruptcy can leave you with bad credit, no assets and a drained bank account. These problems could lead to a denied application when you try to borrow new credit from your bank or credit union.

However, once your case has been discharged, there are plenty of alternative lending businesses that will approve you for a personal loan, despite your bankruptcy. 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. 

Things to know about bad credit personal loans:

  • Alternative lenders may charge higher interest rates and fees
  • The lender may ask you to provide collateral or a cosigner as loan security
  • Private lenders are harder to regulate (chance of scams and predatory rates)

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 

Can You Get Payday Bankruptcy Loans?

Yes, payday loans are one of the easiest loans to qualify for after bankruptcy. One of the main reasons being, payday lenders don’t check your credit. They base their approval on your income level, employment stability and debt level. 

While these are extremely accessible loans, it’s important to note that they charge high-interest rates and fees. They also come with very short loan terms and only fund at most $1,500.

Note: Payday loans are extremely expensive and can lead to a cycle of debt if you’re unable to repay the full amount borrowed. To Learn about the payday loan laws in your province, click here.

Where Can You Get Bankruptcy Loans?

Bank loans are likely unattainable after bankruptcy. If you want to secure a loan, you are most likely going to have to rely on alternative lenders. 

While banks place a lot of emphasis on your credit score in assessing your reliability, alternative lenders balance their approval on other factors, including income, job stability, capital, and debt-to-income ratio when deciding whether or not they want to lend to you. 

Keep in mind, however, that alternative lenders offer loans that have higher interest rates to offset the risk of a borrower with unfavourable credit. 

Where Can You Get Bankruptcy Loans?

Amount Interest Rate Term Province Availability
Loans Canada Logo
Loans Canada
Up to $50,000Prime to 46.96%4 - 60 monthsAcross Canada Learn More
iCash
iCash
Up to $1,500Varies by province*Max 62 daysBC, AB, MB, ON, NB, NS, PEI Learn More
Captain Cash
Captain Cash
$500 - $750Varies by province*90 - 120 daysBC, AB, ON, NB, NS, PEI, NL Learn More
Cash Money
Cash Money
Up to $1,500Varies by province*Up to 62 daysBC, AB, ON  Learn More
Cash4You
Cash4You
Up to $1,500Varies by province*Next paydayBC, ON Learn More
Money Mart
MoneyMart
$120 -  $1,500Varies by province*Max 62 daysBC, AB, SK, MB, ON, NS Learn More
Pay2Day logo
Pay2Day
$50 - $1,500Varies by province*Up to 31 daysBC, ON, NS Learn More
Instant Payday Canada
Instant Payday Canada
Up to $1,500Varies by province*Up to 60 daysBC, AB, ON, NS Learn More
*The maximum borrowing cost for a payday loan varies by province, learn more here.

How To Increase Your Chances Of Qualifying 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. In addition, it will become tough to get approved for new credit products. 

Don’t worry, if your credit has been hurt by bankruptcy, there are several financial products available in Canada that can help you rebuild it. 

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:

A Secured Credit Card 

With a secured credit card, every payment you make will be reported to the credit bureaus. This will help build your payment history and credit history. Keep in mind that rebuilding your credit will take time. It won’t happen overnight. Using your secured credit card responsibly, developing healthy credit habits and sticking are all important steps. 

Credit Builder Loan

Credit builder loans are loans that function to improve your credit. Suitable for those with bad credit, or those with no credit history like newcomers, credit builder loans help you increase your credit score.  

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. At the end of the term, you receive all of your money back (minus any fees and interest charged). Your goal is to have a solid history of monthly payments for the credit bureau.

Keep Your Debt Low

Your debt-to-income ratio is an important indicator of your ability to repay a loan. When applying for a loan, make sure that your debt doesn’t make up more than 35% to 45% of your income. Lenders generally prefer borrowers to have a DTI ratio of less than that.

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.

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 Compare Hub
  • 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. 

Watch For These Factors When Applying For a Loan After Bankruptcy

Don’t forget, you’ll have limited options when you apply for new credit after bankruptcy. Since you’ve had trouble paying your debts in the past, many lenders will claim that you’re a riskier borrower. As such, you may have to look out for:

  • Higher Interest Rates – Some subprime lenders charge 300% to 500% APR for small loans with short, restrictive payment plans. Generally, the worse your financial health and credit are, the higher your rate will be if you’re approved.
  • Fees – Although your interest rate may seem reasonable, the lender might compensate by charging lots of administrative and service fees for their loans. They may also charge penalty fees for late payments and prepayments. 
  • Payday Lenders – These businesses usually offer loans of $100 to $1,500 with minimal requirements. Unfortunately, they also charge extremely high-interest rates/fees and offer short repayment terms of 14 to 60 days. 

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. During the bankruptcy process, it’s important to stay focused and work in collaboration with your LIT. Once discharged, one of your top goals should be to start rebuilding your credit. This way you’ll be able to access the loans your need in the future. 

Bankruptcy Loans FAQs

How long will bankruptcy remain on my credit report?

It depends on the credit bureau that you check with and where you live. Currently, bankruptcies stay on your Equifax and TransUnion credit reports for 6 years, unless you live in one of the following provinces (in which case 7 years is standard):
  • Quebec
  • New Brunswick
  • Ontario
  • Newfoundland and Labrador
  • Prince Edward Island

Can I get a mortgage after bankruptcy?

Obtaining a mortgage after bankruptcy is difficult but not impossible. You’ll need to give yourself time to rebuild your credit. Mortgage lenders will also assess your income, debt levels, loan-to-value ratio of the property, the condition of the property, and your assets. 

What’s a good secured credit card?

There are several secured credit cards that can help consumers looking to rebuild their credit after bankruptcy. Depending on your financial situation, you should consider any of these secured credit cards.

Can I get a loan if I declared bankruptcy?

If you’ve been discharged from your bankruptcy, you can get a loan. However, your options will be limited and the interest rates you get will be expensive.

How long do I have to wait before applying for a loan after a bankruptcy discharge?

There’s no legal waiting period before applying for a loan following bankruptcy. That said, it can definitely be easier to get approved for a large amount of money, a low-interest rate, and a good loan term if you give your finances time to recover.

Are no credit check loans a good option?

In Canada, it’s possible to find a lender that won’t check your credit when you apply. Instead, they focus on your income, collateral, and your overall financial profile. Auto equity loans, payday loans and other short-term high-interest loans are common examples.  However, no credit check loans can be really expensive and could only lead to more unmanageable debt if you’re not careful.
Chrissy Kapralos avatar on Loans Canada
Chrissy Kapralos

Chrissy is a Toronto-based communications advisor. With an English degree from the University of Toronto and editing courses under her belt from Ryerson University, she has continued her lifelong passion for writing and editing. In addition to working for Loans Canada on a variety of financial topics, Chrissy has a few years of resume writing and editing under her belt, and takes great pleasure in helping people find work that fits with their experience and passions. When she isn't working, you can find her practicing yoga, hanging out with her dog, reading up on financial and real estate news, or planning her next trip abroad.

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