Vehicle Advice: Financing a Car After Bankruptcy

by Susan Paige on November 27, 2018 · 0 comments

As if the car buying process isn’t fraught with enough anxiety, the idea of getting an after bankruptcy car loan can be a catalyst for many a sleepless night. But it doesn’t have to be. In fact, you’ll find a number of lenders are more than willing to help you get back on the road. It isn’t a hopeless situation. Here’s what you need to know about financing a car after bankruptcy.

Don’t be Intimidated

OK, so you had to file for bankruptcy protection. You aren’t the first person ever to do so and you won’t be the last. While you might be embarrassed by the situation, don’t let intimidation steer you into desperation. This kind of thinking could also expose you to predatory lenders. You don’t have to go to the “buy-here, pay-here” route and subject yourself to exorbitant prices either. Lots of traditional lenders are willing to work with you. You just have to approach the process in an organized fashion.

Your Credit Score

While it might sound counterintuitive, your first step should be to pull your credit report and check your credit score. Depending upon the nature of your situation it might not be as bad as you think. You’re entitled to one free look your report each year. You can get yours at

With this information in hand, you’ll be in a better position to negotiate a more favorable interest rate. Highlight any previous car loans on the report—particularly if they were always paid on time.

Gather a Down Payment

Anything you can do to reduce a lender’s exposure will be looked upon favorably when you request a car loan. Having a generous down payment says you’re willing to take on some of the responsibility of the transaction. The lender also has the car as collateral, so if things go awry, there’s another piece of security in their favor.

Get Pre-Approved

If you have a relationship with a bank or a credit union, start with them to see what they can do for you. There are also a number of online lenders like RoadLoans offering after bankruptcy car loans. Shopping for a loan online is faster, less stressful and has another key advantage.

Many lending sites shop your application around to a number of financial institutions with just one credit check. This gets your application in front of a wider range of lenders, improving your odds of getting a palatable interest rate. It also reduces the number of inquiries on your credit report, a multitude of which can be detrimental to your credit score.

Ultimately though, your goal is to have a loan approved before you show up at a dealership. This gives you a bargaining chip when it comes to securing the best possible interest rate. With an offer in hand, you can put them in a competitive situation in which they’ll have to try to beat it if they want to make money on your loan too.

It Can Improve Your Credit Score

If you get a car loan after a bankruptcy and pay it on time, you’ll see an increase in your credit score. In a report entitled Subprime Auto Loans: A Second Chance at Economic Opportunity, the credit monitoring agency Equifax noted people who had subprime car loans and managed them well saw a 62.5 percent increase in their credit scores. The key is paying it on time—every time!

Plan to Refinance

When it comes to financing a car after bankruptcy, you will be paying a higher interest rate—even if you do everything above. However, if you service the loan properly, you can look into refinancing it after you’ve proven you’re on top of things and possibly lower the rate to something more reasonable.

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