Helping With Your Financial Future

Getting a car loan after bankruptcy

On Behalf of | Apr 14, 2023 | Life After Bankruptcy

Filing for bankruptcy will have a negative impact on your credit score and this your creditworthiness. Typically, taking this step will result in an at least temporary reduction in your score, which may make you ineligible for certain types of loans. However, it may also reduce your credit utilization rate and debt-to-income ratio, which may increase the chances of a California lender approving your request for a car loan.

Take steps to reduce your default risk

Your life after bankruptcy will likely be spent taking extra steps to convince lenders that you can be responsible with debt. You may be able to help your cause by finding a cosigner who has a high credit score, making a large down payment or both. If you do add a cosigner to your loan, they will be responsible for making payments in the event of a default. Therefore, the lender can be confident that payments will be made in a timely manner.

Some lenders specialize in bad credit loans

You may need to work with a lender that specializes in issuing loans for borrowers who have no credit or bad credit. In some cases, these lenders work directly with dealerships that promise to get you approved for a loan regardless of any blemishes on your credit report. It may be possible to refinance the loan a year or two after obtaining it as your bankruptcy has less of an impact on your credit.

While it may be difficult to get a loan in the first few months after bankruptcy, it’s not impossible to obtain the financing needed to buy a car. This is largely because a vehicle is a secured asset, which means that the lender can use it as collateral until you have repaid the loan in full.