Can You Get A Car Loan After Declaring Bankruptcy?

Discharged bankrupt car loans are possible!

Being declared bankrupt doesn’t have to mean that you are limited to public transport, relying on friends and family for lifts, or the expensive option of taxi transport, if you no longer have a car. A car is often essential for family mobility, and for stable employment.

Despite popular belief, it is still possible to get a car loan even if bankruptcy appears on your credit history.In fact, getting a car loan that you can afford may help you to improve your credit rating, as long as you consistently make every repayment on time.

So Can I Get a Loan If I’m Currently Bankrupt?

NO. You must be discharged from bankruptcy before you get approved. This will usually be 3 years and one day after the bankruptcy, but may be as long as 5 or 8 years in some cases.

Once you have been discharged from bankruptcy however, there are a number of finance companies (like us!) who can offer you a second chance to improve your credit rating and rejoin the loan market.

So, Is It Easy To Get a Car Loan Even If I’ve Been Declared Bankrupt In The Past?

Obviously, you will need to do your research but it is becoming easier than ever to get a car loan after bankruptcy. A broker can help you to find the right loan which will take your soft credit history into account and benefit you into the future.

In fact, due to the fact that the lender can use the car as collateral, a car loan is much simpler to get financing for than a personal or unsecured loan.

If you do fail to make repayments and the lender deems the debt uncollectable, the lender will simply repossess the car.

REMEMBER: Even though there are many options out there for getting car loans after bankruptcy, always try to plan thoroughly and make careful decisions to avoid getting loans that may lead you into further debt.

What steps should you take to secure a car loan after bankruptcy has been discharged?

Just because you have a bankruptcy filing in your credit history does not mean that you need to expose yourself to a ‘loan shark’. You can use taking out a car loan as an opportunity re-establish your credit history and improve your standing for the future.

By following these 7 steps, and seeking professional advice, you can find a loan that is personalised to help you to establish a responsible repayment history.

1. Do you really need a new car?

If so, consider what you need the car for. Do you need to be able to take the kids to school? Do you drive to work? Do you need a car to get to perform work duties?

Write a list detailing the reasons for purchasing a car, and what you will use the car to achieve.

Now that you know why you are making the decision to apply for a car loan, you are ready to consider what type of car you are looking for.

2. How much can you really afford to spend?

When purchasing a car, remember to allow for running costs, registration and costs of car maintenance when deciding how much you will spend.

A second hand car will generally provide better value for money.

If getting a fast, expensive car is important to you, start with a cheaper model and only consider upgrading when your credit rating improves.

Speaking to a finance broker can help you to work out what you can afford before you begin shopping around.

3. Shop around for the right loan. Compare as many offers as you can.

An online lender may be able offer you 3 or 4 offers in a single application, after getting some information of your financial situation and credit history. Using a finance broker who will make multiple enquiries directly with lenders on your behalf using a single credit enquiry will minimise the potential negative impact of multiple credit enquiries on your credit report.

A finance broker will also clearly outline the cost of the loan contract, protecting you from any hidden costs and making sure that you will comfortably meet repayments.

As a bad credit borrower, you should be prepared for interest rates as high as 19% when financing a car after bankruptcy, so you want to make sure the amount you are borrowing is as low as possible. If you can save up a down payment this will help make it easier to find an affordable loan.

4. Get pre-approval for a car-loan.

This gives you a budget to work within. Because a finance broker isn’t associated with any particular lender, they are free to find you a loan that you can afford to pay, protecting you from signing a loan that could later harm your credit history if the repayments are too hard to meet.

5. Choose a car that is reliable, and fits your needs.

Find a guide to the cheapest cars to run here. If you find and purchase a car yourself, make sure that you run Personal Property Securities Register check on the car the day you make the purchase to ensure that it is not under finance. This check will only cost $3.50, and protects you from assuming any hidden liabilities if the car is still under finance.

If you are buying a second hand car, it may be worthwhile having a mechanic look over it to ensure that it is in good condition.

A finance broker may also be able to help you to find a suitable vehicle. In addition to sourcing a suitable car, the broker will ensure that up-to-date safety certificates and checks are completed, and they will make a PPSR check on your behalf, before the deal is sealed.

6. Make re-payments on time.

Once you have made your purchase and entered into a loan contract, always ensure that you make your payments on time.

One way to make this happen is to set up an automatic direct debit from your bank account that comes out on the same day you are paid. This way you never have to worry about whether there is enough money in your account for each repayment.

If you can keep up regular repayments for 6 months, your credit score will improve over the term of your loan.

7. Consider re-financing

Once you have a 6-12 month history of timely repayments, you should consider refinancing your loan. At this point, it is likely that you will be better rates.

A Final Word On Bankruptcy

If you have not already declared yourself bankrupt, but think it might be the best option, make sure that you consider whether it is the only option left.

In many circumstances it cann be avoided. It important that you explore all avenues, because a bankruptcy affects individuals for the longest time period of any credit scenario.