How to apply for a car loan after filing for bankruptcy
If you’ve recently filed for bankruptcy, you’ve likely wondered how you’ll be able to qualify for a car loan going forward. You’ll be happy to hear that you can still secure a loan after being discharged as long as you follow the right steps.
Here are some helpful tips for applying for a car loan after filing for bankruptcy:
Check your credit report
Sure, the thought of checking your credit report after filing for bankruptcy may not seem overly appetizing, but it’s important to figure out where you stand.
You should concentrate your attention on what the report says regarding your previous auto loans, as that’s what a lender would care most about. If you made your payments on time prior to filing for bankruptcy, you could be in good shape.
Save for a bigger down payment
The more cash you can provide up front, the higher the chance a lender will approve a loan for you, even after filing for bankruptcy. If you’ve recently been discharged, it may not be a bad idea to wait about a year before applying for a loan and save up as much cash as possible during that time.
If you can’t provide cash up front, you may still be able to secure a loan by bringing in a vehicle with high trade-in value. If the dollar difference between your old vehicle and new vehicle isn’t that substantial, securing a loan may not be as difficult as you originally thought.
Pay on time
If you do happen to secure a loan, make sure to do everything in your power to make your payments on time. This will help to strengthen your credit score following bankruptcy and will increase your odds of securing other loans in the future.
You may need a cosigner
Since you will be deemed a higher risk to lend to, you may need to find a cosigner to help secure a loan. You can ask a close friend or family member if they’re willing to cosign for you. Remember that cosigning a loan is a big commitment for someone to undertake, so make sure you ask someone who knows you well and trusts you.
You should be aware that you likely won’t qualify for the same type of loan you would’ve prior to filing for bankruptcy. Unfortunately, you’ll likely be forced to pay a higher interest rate and will have to pay more than someone with an average credit score. Budget ahead of time and be aware that you may have to pay more for a vehicle compared to before.
Don’t feel ashamed
Don’t let the fear of unearthing your bankruptcy prevent you from applying for a car loan.
Remember here’s no need to feel embarrassed or ashamed if you’ve filed for bankruptcy, as it happens to many Canadians on a daily basis.