Having bankruptcy on your credit reports can make it difficult to get a car loan. However, there are lenders who help borrowers in case of bankruptcy!
Why does bankruptcy affect vehicle financing?
Bankruptcy affects the ability to obtain a car loan for two main reasons:
- Bankruptcy harms your credit history
- Traditional lenders may be wary of helping borrowers in bankruptcy.
A poor credit rating is a common reason for rejectionbecause lenders use a borrower’s credit rating to determine eligibility for a car loan. Often, traditional lenders require borrowers to have a FICO credit rating of around 670 or higher in order to qualify for vehicle financing. If bankruptcy downgrades your credit score to below the general threshold for good credit, you may struggle to qualify for a car loan even if you meet other criteria.
In addition to the damage that bankruptcy can do to your credit rating, traditional lenders may be wary of working with borrowers who have active bankruptcy on their credit report. If you are currently in the process of bankruptcy, you may be denied vehicle financing because the lender fears that a car loan may be included in the registration.
If you have successfully completed your bankruptcy proceedings (this is called a waiver), it will be easier for you to qualify for auto loans. However, bankruptcy damage can last seven or ten years, depending on how you filed it. Chapter 7 bankruptcy reported for up to 10 years from the date of application, while Chapter 13reported for up to seven years.
There is no doubt that bankruptcy can affect your chances of getting a car loan. However, there are lenders who can help borrowers in bankruptcy cases if you know where to look!
Finding creditors for bankruptcy
Typically, traditional lenders such as banks and credit unions prefer borrowers with good credit reporting; no negative marks such as collection accounts, bankruptcy, return to possession, and / or several missed or late payments. However, there are lenders who can help borrowers in this situation.
Subprime auto lenders
Subprime lenders are third party organizations and are registered with special financial offices… They are equipped to deal with many unique credit situations such as no credit, repossession and ad hoc bad credit such as bankruptcy.
With a sub-prime lender, bad credit history and reports aren’t enough to keep you from getting involved in vehicle financing. They rely on other factors related to your ability to pay your car loan, for example:
- Current income and work history
- Down payment amount
- Live stability
- Debt to income ratio
- Your credit reports in general
Buy here pay here dealers
Buy here pay dealers here, or BHPH dealers, are unique in being both lender and dealer. They are sometimes known for skipping credit checks entirely and believing that your ability to pay off your car loan depends on your income, work history and down payment.
If your credit history isn’t flawless and traditional or sub-prime lending isn’t working, then this is a good next choice if you need a car quickly. The catch with these dealers, however, is that you will likely need a large down payment (sometimes up to 20% of the car’s sale price), these dealers only sell used cars and you might have to expect a higher amount. average interest rate on a loan.
Ready to find a dealership?
Finding a lender who can help with automatic bankruptcy financing is no easier said than done. Often times, dealerships with poor credit lending options do not advertise their lenders, making it difficult for you to find the credit resources you need for your situation.
But don’t be afraid – Car loan Express wants to help you get back on your feet and hit the road. Using our nationwide network of dedicated finance representatives, we will look in your area for a dealer who can help with credit problems such as bankruptcy.
Complete our free car loan application form today and we’ll get to work.