Are There Auto Loans for Post-Bankruptcy Borrowers?

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Content Manager

Bethany Hickey is a Content Manager and Writer for Auto Credit Express, CarsDirect, and many other automotive blogs. She's a graduate from the University of Michigan-Flint, with a bachelor’s in English-Writing. 

, Content Manager - December 2, 2020

The short answer is yes! There are auto loans for borrowers who’ve gone through bankruptcy. Not every dealer can offer post-bankruptcy car loans, but you’ve got two main options to check out if you’re a bankruptcy borrower.

Car Loans After Bankruptcy

Deciding to go through bankruptcy isn’t an easy choice. It’s a long and tough process to put yourself and your finances through. However, once it’s discharged, it usually means you’ve got a clean slate ahead of you.

After you’ve been discharged from bankruptcy, you can usually get approved for an auto loan pretty quickly – if you meet the requirements and work with the right lender.

Even with a clean slate, a bankruptcy on your credit reports can make it feel like you’re out of car loan options. Getting turned away by traditional auto lenders from banks, credit unions, and captive lenders can dim your spirit. With unique credit situations like bankruptcy, you’ve sometimes got to think outside the box and look for alternative lending options to get the vehicle you need.

While traditional lenders can be hesitant, subprime lenders and in-house financing lenders are equipped to help you. Whether you’ve gone through Chapter 7 or Chapter 13, these lenders can look past a bankruptcy on your reports and take a look at the bigger pictures of your financial stability. Some bankruptcy lenders can finance those in an open Chapter 13 bankruptcy, too!

Types of Bankruptcy Auto Lenders

Bankruptcy borrowers typically have two main choices for car financing: subprime or in-house financing.

Subprime financing is done through dealerships that are signed up with subprime lenders. They’re third-party lenders, so you never meet them in person; instead, you work through the whole process with the dealer’s special finance manager.

You submit all of your documents – check stubs, proof of residence, driver’s license, and so on – to them, and they send it along to the subprime lender. If you qualify for financing, you choose a vehicle from the dealership’s lot.

In-house financing is done with buy here pay here (BHPH) used car lots. These dealers are also the lenders, so they don’t need to wait on another lender to approve you for financing. They help you pick the vehicle and provide the financing. Since these dealerships don’t use third-party lending resources, they typically skip the credit check.

Many bad credit and bankruptcy borrowers alike seek out BHPH dealers for a chance at auto financing because the biggest qualifiers for an in-house financing car loan are income and down payment, not your credit score.

Onward to Better Credit!

A bankruptcy on your credit reports doesn’t mean you’re out of luck for vehicle financing. If you qualify for a subprime auto loan, the payments are reported so you can work to heal your credit. In-house financing dealership may not report your payments, though,

Depending on how you filed for bankruptcy, it’s only going to be reported on your credit for between seven and 10 years. With each passing year, the negative effect of a bankruptcy lessens, though. With good management of all other credit you take on after your bankruptcy, you can walk away with a better credit score for the future.

Take the leap right now by filling out our free car loan request form. Here at CarsDirect, we match bankruptcy borrowers to dealers that are teamed up with lenders ready to help.


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, Content Manager

Bethany Hickey is a Content Manager and Writer for Auto Credit Express, CarsDirect, and many other automotive blogs. She's a graduate from the University of Michigan-Flint, with a bachelor’s in English-Writing. 

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