Getting a Car Loan After Bankruptcy

Bankruptcy car loans are often an overlooked side of the industry, but with the team here at Granite Hyundai ready to walk you through what a bankruptcy car loan might look like for you, there's no reason to shop anywhere else. Filing for bankruptcy does not have to ruin your financial present or future, and with the right planning and a creditor behind you, there is light at the end of the tunnel. Stay tuned as we dive into how bankruptcy car loans work and how to best prepare for a loan after filing for bankruptcy.

Bankruptcy and Its Impact on Auto Financing

When you file for bankruptcy, it can give you a somewhat negative view in a bank's/lender's eyes. Because of that, future auto loans may be denied or, if approved, come with very high interest rates and expectations. Of course, there are bankruptcy car loans and programs to get your credit repaired to secure a loan on your new car, which Granite Hyundai is happy to help you figure out.

Types of Bankruptcy and How They Affect Eligibility

The most common types of personal bankruptcy are Chapter 7 (liquidation) and Chapter 13 (repayment plan). Eligibility for car loans can be heavily impacted by a bankruptcy filing, disqualifying you from many options almost immediately. A repayment bankruptcy might look better than a total loss bankruptcy, so that is something to note.

Note: The different bankruptcies include Chapter 7, 11, 12, and 13, with Chapters 7 and 13 being more common for everyday people.

How Long Bankruptcy Stays on Your Credit Report

A bankruptcy stays on your credit report for seven to ten years on average. This information appears in the public records section of your credit report. Bankruptcy is when you can no longer handle your debt and likely cannot pay most of it back, so getting a car right after will be a challenge. Even within the 7-10-year timeframe, it might be more challenging than if you had not filed.

• Chapter 7, 11, or 12: These types of bankruptcies can stay on your credit report for up to 10 years from the date of filing. Chapter 7 involves the liquidation of assets and the discharge of debts.
• Chapter 13: This type, which involves a court-supervised repayment plan (usually 3 to 5 years), typically stays on your credit report for seven years from the date of filing.

What Is the 3 Year Rule for Bankruptcy?

The three-year rule for bankruptcy is a condition that generally allows for the potential discharge of federal and state income tax debts, provided the tax return due date (including extensions) was more than three years before the date you file for bankruptcy.

Will Filing Bankruptcy Help Me Get a Car?

Not necessarily. When you file for bankruptcy, this essentially wipes qualifying debt from your hands, but the paper trail remains. Getting a car usually requires a level of responsibility and financial literacy that many creditors consider to be unaligned with filing for bankruptcy.

How Long After Bankruptcy Can You Borrow?

You can get a bankruptcy car loan right after filing for bankruptcy. Although this may be surprising, many auto loans are friendly to those who have filed for bankruptcy, but expect subprime interest rates, longer repayment timeframes, and more nos than yeses.

How to Rebuild Your Credit Before Applying

You want to keep your credit healthy, even after a bankruptcy filing. There are ways to rebuild your credit before applying for auto loans, and the first step is to establish new credit and a good, on-time payment-filled reputation. Think of this as starting on a fresh page, so bankruptcy is often seen as a new beginning for high-debt individuals.

Checking Your Credit Report for Errors

Check your credit report for false debt amounts, accounts that are already paid, discrepancies in account age and history, and so forth. The quickest way to improve your credit is to find something incorrect on your score, which will lead to a rise if it is corrected after the update.

Establishing New Credit Responsibly

Although it sounds scary, applying for a new credit card might boost your credit score following bankruptcy. That would remain true if you pay your monthly bills and do not fall back into high-debt, high-risk behaviors. Credit is a balancing act, so try to read up on how to use and repay credit cards, loans, and so on.

Using Secured Credit Cards or Credit-Builder Loans

Some ways to build credit include secured credit cards and credit-building loans. With a secured credit card, you have to put down a cash security deposit, which typically becomes your credit limit. If you go with the credit builder loan, it will be an installment loan specifically designed to help build credit. The process is reversed from a typical loan.

How To Qualify for An Auto Loan After Bankruptcy

Qualifying for a bankruptcy car loan requires you to clean up your credit score and history before submitting your approval papers. You generally want all of your debts discharged before getting started with another major loan, automotive or not. Remember, high debt can mean a low credit score, and if you recently went through bankruptcy, more debt is the last thing you are trying to take on.

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Tips for Getting Approved With a Past Bankruptcy

If you have a past bankruptcy and want to get started with an auto loan, there are ways to get approved for the car, truck, or SUV you have been looking at.

Working With Subprime Auto Lenders

Working with subprime auto lenders is something to kick off your auto loan journey, especially if you have filed for bankruptcy in the past. Subprime lenders work with people who have low or bad credit, and this is a great way to get the car loan approved without sky-high rates or hoops you need to jump through.

Getting Prequalified Before Visiting the Dealership

Prequalification is always a plus when visiting the dealership. Getting prequalified means that a lender is likely willing to give you money, or in this case, funds for your vehicle, and a potential creditor or lender looking at your application will view this scenario more favorably.

Applying With a Cosigner

If you apply for a car loan with another person (who has healthy credit), this looks better to a potential lender. A cosigner is the person on a loan or credit application who essentially has to "step in" in the event you are unable to make on-time payments to your car loan servicer.

Considering a Less Expensive or Used Vehicle

Always try to spend less money on a car when recovering from bankruptcy. Bankruptcy car loans often come with rules and conditions for buyers, and a bank or loan provider is not going to be ready to transfer funds outside of your current budget and credit history. If they don't trust you to be able to reliably pay them back, don't expect a yes.

What to Expect During the Loan Application Process

During the loan application process, you can expect further questions and examinations by the bank or creditor you are asking for money from. Bankruptcy, although common for many people in today's world, is still not a "normal" thing for big banks. They see you as a risk, which means you will likely have to submit additional income documentation, prove you can repay debt on time and responsibly, and be debt-free or have very little debt at the time of the application.

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Smart Ways to Protect Your New Auto Loan

The smartest ways to protect your new auto loan would be quick, on-time payments every month, a down payment if you have the funds to do so, low credit utilization when applying for the auto loan, and choosing a car that fits your current and future budget that won't have you struggling also to make your housing payment and other essential debts that come around each month.

How Granite Hyundai Helps Buyers After Bankruptcy

Granite Hyundai in Somersworth, NH, helps people looking to get started with bankruptcy car loans, and our team of experts is here to walk you through the basic steps to prepare yourself for the big day. We offer credit restoration options for car shoppers through our dealership, and we can review your credit report to identify any discrepancies that may be holding you back from the car, truck, or SUV you have been waiting to buy.

Use Granite Hyundai's Credit Restoration Program

Our dealership and sales and finance teams here at Granite Hyundai in Somersworth, NH, are ready to get you going with credit restoration, whether you have previously filed for bankruptcy or simply have a lower-than-average credit score. High debt or a history of high debt can cause lenders to be more difficult with you during the car loan process, which is why we always advocate for pre-loan checklists like report checks and corrections, managing existing debts, choosing a car in your price range, and speaking to an expert before making any huge decisions.

Come in and see us in Somersworth, NH, with any questions on bankruptcy car loans or other types of financing!

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