Can You Get a Car Loan After Bankruptcy?

If you’ve dealt with bankruptcy in the past, you may wonder if it’ll affect your ability to buy or lease a car. Since you may need a car to drive to work, run errands, and complete other life tasks, it’s important to know how to find a vehicle within your budget after filing for bankruptcy. Keep reading to learn more about your financing options and how to get a car loan following bankruptcy.

Can You Get a Car Loan After Filing for Bankruptcy?

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Bankruptcy laws exist to help those dealing with a substantial amount of debt to move on from past financial struggles. This means you can get a car loan after filing for bankruptcy, even if you may need to consider a few more factors. Your car loan possibilities may depend on the type of bankruptcy you filed. Two of the most common options include:

• Chapter 7 bankruptcy: This type of bankruptcy can help you gain a clean slate and typically involves selling all of your assets to cover existing debts. Your bankruptcy trustee may have sold your vehicle, so you might now need a new one. It’s important to wait until you finalize your bankruptcy, which may take four to six months to complete, before purchasing another vehicle.
• Chapter 13 bankruptcy: This kind of bankruptcy exists to help you pay off your debts as a consumer. It includes creating a payment plan and preventing debt collectors from pursuing other methods. With a consistent income, you can typically keep your existing vehicle if you file for this type of bankruptcy, and you may be able to purchase a car during bankruptcy as long as you receive permission from the court.

How To Get a Car Loan After Bankruptcy

At Nucar Toyota of Norwood, we know how important it is to have the sense of independence and stability that a car can offer, so we care about helping you get a car loan even after filing for bankruptcy. Here are some steps you can follow to complete this process:

• Review your credit: Before applying for a car loan, it’s important to review your credit score to better understand your personal financial situation. Since the type of bankruptcy you file for can impact your credit in different ways, it’s important to always check your score before applying for a loan.
• Create a budget so you can save for a down payment: After reviewing your credit, evaluate your finances and create a budget so you can save for a down payment on a vehicle. Since it’s important not to spend more than 10% of your budget on transportation costs, creating financial guidelines for yourself can help you find a car loan within your price range.
• Check out your options: Since we know that you’re usually presented with many options when shopping for a used car, you can browse our extensive inventory of used vehicles to find one within your budget that meets your needs.

What Should You Do To Rebuild Your Credit?

After filing for bankruptcy, you may notice that your credit score declines depending on how many accounts you included in your bankruptcy and how high your score was before filing. You can expect to lose more points when you file if you have a higher score. It’s important to highlight your ability to overcome your financial difficulties and rebuild your credit, and you can start by making payments on time. Here are some other things you can do to start improving your credit score:

• Sign up for a secured credit card: Secured credit cards are for people looking to improve their credit scores, especially if these are particularly low. While other cards may allow you to qualify by showing them you have a high credit score, you can apply for a secured credit card simply by making a deposit.
• Ask a loved one to add you as an authorized user: If a loved one has good credit, consider asking them to add you as an authorized user on one of their credit card accounts. This allows you to benefit from their positive financial habits and build your credit as they make regular payments.
• Apply for a loan to build your credit: You can also apply for a credit-builder loan with a community bank or credit union, which is a small loan that usually has a high interest rate. You can typically pay these back quickly to showcase your ability to make payments and honor financial commitments, which can help to boost your credit score.

How Will Bankruptcy Affect Your Application?

Filing for bankruptcy may make some lending institutions more hesitant to make you an offer, but this doesn’t mean you won’t be able to find one that works for you and your financial needs. You can discuss your options with the experts in our finance center who are eager to help you get a car loan that suits your budget. Filing for bankruptcy doesn’t need to get in the way of you being able to afford the vehicle you want.

What Types of Car Loans Are Available After Bankruptcy?

While Chapter 7 bankruptcy stays on your credit report for 10 years and Chapter 13 bankruptcy for seven years, there are still several types of credit loans you can apply for, as your financial history can begin to improve once you discharge your debts. While it’s likely that the car loans you’ll qualify for will be higher than the choices available to other drivers, it doesn’t mean you can’t purchase the car you want and begin improving your credit score. Our finance team is well-versed in post-bankruptcy loans and is ready to help you review your options.

If you have other questions about receiving a car loan after filing for bankruptcy, contact us to speak with a member of our finance or sales team. We’re here to help and eager to get you back on the road in a car you love at a price within your budget.