Bankruptcy and car loans
Bankruptcy and car loans
Posted on November 13, 2019
There was a time when bankruptcy was regarded as the end of the road as far as finance was concerned. Once you went bankrupt, that was it. No more credit, no more finance and you could forget about a car loan! That has all change now thanks in part to the financial crisis and the liberalization of the financial market. Now bankruptcy is just a bump in the road and not the end of it.
That said, bankruptcy will impact your ability to get a car loan.
It takes time
Filing for bankruptcy will take time to fix. It will usually take a minimum of 9 months to discharge bankruptcy and the mark will remain on your credit report for a while after that. Expect to not qualify for a car loan within that first nine months and expect to have to prove that you have made changes in your financial life and have addressed whatever caused the bankruptcy in the first place.
Recovering takes time but if you use that time wisely you can begin to rebuild.
You can rebuild your credit
As you can imagine, bankruptcy will affect your credit score quite severely. It isn’t permanent damage though. Once discharged you can apply for credit and begin rebuilding. You could try a credit card and make every payment and after six months or so you should see your credit score gradually improve.
Once you have at least six months of good credit behind you, it is possible to apply for a bad credit car loan. These cost more than standard loans but will also help repair your credit score. As long as you can afford your repayments and make every single payment on time, your score will improve.
Save for a larger down payment
While you’re rebuilding your credit, save as much as you can so you can make a larger down payment on the car. Make sure to use it to lower the amount you borrow rather than buying a more expensive car and it will lower the overall cost of the loan.
It will also reassure lenders if you’re putting a decent amount down on a car. You’re risking your own money as well as theirs and if you miss payments, those lenders have more chance of recovering their investment.
Use a reputable lender or dealership
Not all bad credit car loans are created equal so choose with care. Car Nation Canada works with some leading lenders and some will happily work with those with poor credit. If you need a car loan for any situation, we can help. Contact us to learn more!