How Long After a Bankruptcy Can I Get a Car Loan?

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Contributing Writer

David Topham is an Automotive Content Manager for Internet Brands. He works as the lead editor for CarsDirect and Auto Credit Express, and contributes to those sites alongside other Internet Brands' properties like The Car Connection. He was born and raised in Michigan and is a graduate of Michigan State University.


, Contributing Writer - January 25, 2018

A consumer can qualify for an auto loan after a bankruptcy upon discharge, but it may be in their best interest to wait at least a year or more because of the effect it has on their credit.

Getting an Auto Loan After a Bankruptcy

There are two types of personal bankruptcies in the US: Chapter 7 and Chapter 13, and both will drop a consumer's credit score.

A Chapter 7 bankruptcy is a liquidation proceeding that takes a few months to complete, and it remains on credit reports for up to 10 years. A Chapter 13 bankruptcy involves setting up a three- or five-year payment plan to repay debts and stays on credit reports for seven years.

While a bankruptcy takes a toll on credit, post-bankruptcy auto loans are commonplace in the auto finance market and are similar to bad credit auto loans in terms of requirements and interest rates. Consumers are technically eligible for these programs upon discharge, and there are even programs for consumers in open Chapter 13 bankruptcies.

However, if a consumer has an existing auto loan heading into the bankruptcy, how it’s handled can have an effect on their ability to qualify. People who reaffirm on their car loan and have an otherwise solid car payment history and those who include their car loan in the bankruptcy may not have to wait. But those with a repossession outside a bankruptcy typically have to wait at least a year in order to qualify.

Outside of this special circumstance, there’s no set period of time car buyers need to wait after a bankruptcy to get a car loan. Nevertheless, consumers can benefit from giving themselves more time.

Steps to Take While You Wait

Subprime lenders finance post-bankruptcy car loans using stricter approval standards and higher interest rates to offset risk. Consumers with a past bankruptcy benefit from waiting because they can improve their credit and take other measures to increase their chances of being approved.

  • Work to Rebuild Credit – Consumers can build their credit back up with positive habits. The two most important influences on a person's credit score are their payment history and credit utilization. Establishing a strong history of on-time payments and keeping credit card balances low are the top two ways to improve a credit score.
  • Save For a Down Payment – Lenders almost always require a down payment from consumers with bad credit. A borrower can help their approval chances by saving up more than the minimum amount required. Putting money down on a car reduces the amount financed, which lessens risk for the lender (hence the improved chances of approval) and results in lower interest charges and monthly payments.
  • Enlist the Help of a Cosigner – Post-bankruptcy borrowers can benefit from getting a family member or close friend with good credit to cosign the loan. A cosigner can be the difference in qualifying, and may even lead to improved loan terms.

Help with Post-Bankruptcy Auto Loans

Lenders who finance consumers with a past bankruptcy only sign up with certain dealerships. Whether you've taken the time to improve your situation post-bankruptcy or you need a car soon after, CarsDirect wants to help set you up with the right dealership.

We work with a coast-to-coast network of special finance car dealerships that are capable of assisting borrowers with less than perfect credit, including bankruptcy situations. If you fill out our secure car loan request form, we'll get to work on connecting you with a local dealership.

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, Contributing Writer

David Topham is an Automotive Content Manager for Internet Brands. He works as the lead editor for CarsDirect and Auto Credit Express, and contributes to those sites alongside other Internet Brands' properties like The Car Connection. He was born and raised in Michigan and is a graduate of Michigan State University.


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