There aren’t many lenders that will give you a second chance straight after you’ve been discharged from a bankruptcy. If at all possible, you should look at purchasing a cheap used vehicle outright. If that’s not an option, you’re going to want to have a solid explanation as to why you went bankrupt and why this time, things will be different.
If you’ve got a reasonable explanation and you’re able to show that you have improved your financial position since the bankruptcy was discharged, you may still be able to get a car loan with a decent interest rate, but there’s a chance you’ll be required to have a large trade in or deposit to reduce the size of the loan. If you don’t have a great explanation, a good savings history over the last six to twelve months could really help get a financer on side.
If you had an existing car loan that you were able to meet repayments for and retain during your bankruptcy there is a good chance you’ll be able to find another car loan once you’ve been discharged. If that sounds like you, it’s a good idea to speak to a broker about your situation and the options that may be available.
If you don’t fall under any of the above, but still need a car loan, there’s a good chance the only options that will be available to you will be ‘sub-prime’ loans. These loans come with much higher interest rates than normal car loans, but if they enable you to get moving and get your life back on track the high interest is worth it. Many clients find they are able to refinance these loans after a few years of repayments for a much lower interest rate than they were initially offered.
In general, before applying for a car loan financiers will require you to be discharged for a minimum of twelve months, have no adverse credit history on your credit file since you declared bankruptcy. Your credit file also includes your banking history, so many sure you don’t miss any direct debits or overdraw any of your accounts during or after your bankruptcy.
A common mistake is that a previous discharged bankrupt feels that they should apply for a ‘small’ loan first to see if they can get approved. While that might sound reasonable to you or me, the lender’s opinion is that the applicant is unable to live of their current level of income if they need these short term cash loans, so how could they possibly afford car finance? Never use payday loans, they only put you further behind.
If you’re looking for a car loan and have just been discharged from a bankruptcy, it’s generally best to speak to a professional such as a finance broker prior to applying anywhere, as a good qualified professional should be able to advise when and how to apply. It’s important to have your application presented in the best possible way to give you the best shot at an approval.