Some lenders consider applicants if they've been discharged from bankruptcy or are currently bankrupt. This guide explains what loans bankrupt borrowers may have available to them, the eligibility criteria that need to be met and the costs that apply with the loan.
Are you struggling financially?
If you're struggling financially and would like to speak to someone for free financial advice, information and assistance you can call the Financial Counsellors hotline on 1800 007 007 (open from 9:30am to 4pm, Monday to Friday). If you are suffering financial problems related to the coronavirus pandemic you may be eligible for additional support. Find out more here: https://www.finder.com.au/coronavirus-financial-help
⚠️ Warning about Borrowing
Do you really need a loan today?*
It can be expensive to borrow small amounts of money and borrowing may not solve your money problems.
Check your options before you borrow:
- For information about other options for managing bills and debts, ring 1800 007 007 from anywhere in Australia to talk to a free and independent financial counsellor
- Talk to your electricity, gas, phone or water provider to see if you can work out a payment plan
- If you are on government benefits, ask if you can receive an advance from Centrelink: Phone: 13 17 94
The Government's MoneySmart website shows you how small amount loans work and suggests other options that may help you.
* This statement is an Australian Government requirement under the National Consumer Credit Protection Act 2009.
Can I get a loan if I'm bankrupt?
Some lenders consider applicants that are currently bankrupt or are discharged from their bankruptcy. The lenders that are available are more limited and the fees and rates will also be considerably higher on bankrupt loans. The attachment of h an asset as security or an application made with a guarantor could also be required.
Risks of applying for a loan while bankrupt
Taking out a loan should never be done lightly, and even more so when bankrupt. Watch out for:
- Unreputable lenders. Check the lender has a credit licence and is not charging you more than ASIC allows. The lender should be easily contactable.
- Unaffordable repayments. Consider the size of the regular repayments and ensure the loan is able to be repaid during the loan term. If not, extra fees apply to extend it. Be careful, since repayment periods for these kinds of loans tend to be shorter than regular loans, and bankruptcy can affect available assets and income.
- Multiple applications. Every loan application shows up on credit reports. While lenders might not consider credit history, several applications within a short period can have a negative impact on your credit score moving forward.
- Check rates and fees. Establishment and monthly fees are capped, so be wary of lenders quoting prices beyond the legal maximum amounts. Be crystal clear on what will be charged for late payments or a default on the loan. The total cost of the loan matters here - lenders can charge interest rates on top of everything else.
- Long-term repercussions and legal issues. Once the loan agreement is signed, the customer is bound to its conditions until the loan and any associated rates and fees have been paid. Typically these loans are unsecured, which means that the lender can initiate legal proceedings against the customer if they can't repay.
What kind of bankrupt loans are available?
If you're in need of financing and you're currently bankrupt or have a bankruptcy listed on your credit report, the following loan types might be available:
- Payday loan. These are short term loans up to $2,000 with repayment terms between 16 days and 1 year. Loans up to $5,000 or even $10,000 are also available. Lenders have flexible lending criteria, and while they won't all consider bankrupt applicants, some will. These loans typically come with high fees and charges, as well as shorter repayment periods than other loans.
- Personal overdraft. Your current bank may be willing to approve you for a small personal overdraft if you have a good history with it.
- Personal loan. Bad credit personal loans are available from lenders, some for large amounts.
- Business loans. If you're bankrupt you still may be able to apply for a business loan. These loans are larger, some for amounts up to $500,000, and are designed to finance a range of business purposes.
- Car loan. Secured loans can be easier to be approved for than car loans as they are less of a risk to a lender. Taking out a bad credit car loan may allow the attachment of a newly purchased vehicle to the loan as security.
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- Bad credit applicants considered
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- Borrow up to $2,000
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A short term loan with a fast and easy application available to those with good or bad credit. You can apply today and get approved for up to $2,000.
- Loan amount: $2,000
- Loan term: 9-12 weeks
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- Fees: 20% of borrowed amount + 4% of borrowed amount each month
- Income requirement: 50%+ of income cannot be from Centrelink
- Bad credit borrowers OK
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How does approval work with bankrupt loans?
Here are some of the criteria that will be in place when you're considered for a bankrupt loan:
- Employment. Different criteria are in place regarding your employment. For example, your employment may need to be regular and ongoing and you may not be accepted if you're self-employed or part-time, etc. Check what the lender's restrictions are before applying.
- Centrelink. While you may still be considered for a loan if you receive Centrelink payments, lenders often have restrictions as to what percentage of your income can be made up of benefits (usually 50% if the restriction is in place). Another common restriction is that your loan repayments can't exceed a certain percentage of your Centrelink income (typically 20%).
Here's how to get a home loan if you're a discharged bankrupt
- Income. Lenders often have minimum income requirements in place. They may allow your income to be from employment and Centrelink, or may need it to be solely from regular employment, but it will usually need to be over a certain amount per week or month.
- Assets. For bankrupt loans, the lender may require you to secure an asset to the loan as a guarantee in case you default on the loan.
- Ability to manage your repayments. This is the main requirement lenders have when considering you for a loan. Your income must allow you to easily manage your repayments after taking into account your liabilities and debts. If this is the case and you meet the lender's other criteria, you can make an application, although there's no guarantee it will be approved.
- Guarantor. If you don't meet the lender's criteria, you may be able to apply with a guarantor to increase your chances of being approved.
Which lenders consider bankrupt or discharged bankrupt applicants?
|Brand||Does it approve bankrupt applicants?||Criteria|
|Cash Converters||You can be approved if you've been discharged from a Part 9 Debt Agreement.|
|Cash Train||You can apply as long as you meet the minimum requirements.|
|ClearLoans||You can apply once your bankruptcy has been discharged.|
|Credit24||You must have a reasonable credit history to apply.|
|Fair Go Finance||You need to have entered into bankruptcy at least 12 months previously.|
|Ferratum||You cannot have declared bankruptcy in the prior 12 months.|
|enably||You cannot apply.|
|Nimble||You cannot apply.|
|Rapid Finance||You can apply, your application will be judged on a case-by-case basis.|
|Speckle||You're not eligible.|
|Sunshine Loans||You cannot apply if you're a current bankrupt.|
|Swoosh Finance||You will be considered if you're under a Part 9 or currently bankrupt.|
|Wallet Wizard||You can apply if you're a discharged bankrupt.|
What to know about bankruptcy and Part 9 Debt Agreements
Being bankrupt and being under a debt agreement are two separate things. Understanding the differences and similarities is important.
- How long it lasts. Bankruptcies last for a minimum of three years and a maximum of eight. You're only under a debt agreement until you repay your debts.
- Your credit report. Bankruptcies will show on your credit report two years after the date you were discharged or five years from the date you became bankrupt, whenever is later. A debt agreement appears on your file for five years from the start date. Remember you can check your credit report for free with Finder to receive regular updates to see how you're tracking.
- Your name on the National Personal Insolvency Index (NPII). If you're bankrupt your name will be listed forever, those on debt agreements are only listed for a limited amount of time.
- Eligibility. Bankruptcy has no income, asset or debt thresholds but debt agreements do. You can't be bankrupt if you were previously bankrupt, and you can't enter a debt agreement if you've been bankrupt or under a debt agreement in the past 10 years.
- Employment and income restrictions. Those under debt agreements have no restrictions, but bankrupt people have their income restricted and certain industries may have restrictions regarding employment.
- Other restrictions. If you're bankrupt you have many restrictions, such as not being able to travel overseas without consent, and those under debt agreements usually need to disclose it if they own a business in another name.
The questions we've been asked about bankruptcy
Here are some of the most common questions we've been asked about bankruptcy:
How long does bankruptcy last?
You're usually considered bankrupt for three years, but this can be extended to five or eight years if your trustee lodges an objection to your discharge.
When will my bankruptcy end?
Bankruptcy is considered ended as the result of an annulment or you being discharged.
- Discharged. If you became bankrupt by presenting your own petition, you will be due for discharge three years and one day after you filed that petition and your statement of affairs. If you become bankrupt by a sequestration order of the court, you will be due for discharge three years and one day after your statement of affairs was accepted.
- Annulment. This is the cancellation of your bankruptcy and can happen when your debts are paid in full, your creditors accept a composition or agreement, or you successfully appeal to the court for an annulment.
How long does my bankruptcy remain on my credit report?
Your bankruptcy is listed on credit reporting agencies' records for two years from the date you're discharged or five years from the date you became bankrupt, whichever is later.
After the listing is removed from my file will lenders be able to see I've been bankrupt?
Following the end of your bankruptcy, your name will remain forever on the NPII as a discharged bankrupt. This information is publicly available and any person can pay a fee to conduct a search of the NPII – this includes creditors, journalists and potential reporters.
Can I apply for a no credit check loan without telling the creditor I'm bankrupt?
There is a legal requirement for you to disclose your bankruptcy when applying for a loan over a certain amount. Currently, the threshold is $5,447.
Can I apply for a personal loan to take a holiday?
While you're able to apply for a loan, overseas travel is restricted if you're still currently bankrupt. You need to apply for permission to travel overseas with your trustee if you're currently bankrupt.