What Auto Loan Providers Can Work With a Past Bankruptcy?

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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 - October 12, 2020

Wondering where you can get a car loan after bankruptcy? We’ve got three different auto loan provider avenues to explore for a post-bankruptcy car loan.

The Scoop on Post-Bankruptcy Car Loans

Once you get your discharge papers at the end of bankruptcy, congratulations, because it’s been a long and complex process. Now that you’ve completed your bankruptcy, you can usually get into an auto loan pretty quickly. Hopefully, you’ve come out of bankruptcy with your finances better organized than before, which lenders like to see.

Believe it or not, you’ve got a few options to check out for your next car loan after bankruptcy. Yes, bankruptcy can do some hefty damage on your credit, but that doesn’t mean you’re super limited as to who you can check out for an auto loan.

Regardless of your income, work history, credit reports, and other things, you may still need a lender that can accommodate a past bankruptcy on your credit reports, though. Many traditional lenders are hesitant to approve borrowers who’ve completed bankruptcy, but there are plenty that are equipped to assist bankruptcy borrowers.

Buy Here Pay Here Dealerships

Buy here pay here (BHPH) dealers are known for being a go-to type of financing for bad credit and bankruptcy borrowers. These dealerships use in-house financing, which means they’re also your lender.

BHPH dealers often skip the dreaded credit check because they don’t have to rely on a third-party lender to review your credit and approve you for financing. If they don’t check your credit, your past bankruptcy or bumps on your credit reports don’t impact the loan decision.

While BHPH dealerships typically don’t check credit reports, they may not report your car loan to the major credit bureaus either. If the loan isn’t reported, there’s no chance for credit repair as a result of taking on an auto loan, since your timely payments aren’t reflected on your credit reports. Be advised, though, that missed and late payments are usually reported quickly, and lapses on your car payment history can harm your credit score.

While credit repair may not happen, in-house financing dealers offer bankruptcy borrowers the chance to get into an auto loan quickly.

Direct Auto Lenders

You’ve likely met with some type of direct lender at some point if you’re a seasoned borrower. These are banks, credit unions, and even many online lenders. You meet or connect with these lenders directly, hence the name, and they also offer pre-approvals.

You may think that direct lenders won’t work with you after bankruptcy, but you won’t know until you try. Credit unions in particular tend to be more lenient when it comes to credit score requirements.

Your chances of landing an approval also improve if you’re a long-standing member of the institution and you’ve had a good repayment history with them on past lines of credit. Credit unions in particular are also known for offering competitive rates for their car loans, since they’re member-owned.

Direct auto loans are almost always reported to the credit bureaus, which means you can improve your credit score post-bankruptcy with on-time payments and responsible management of your other accounts. However, if you don’t meet the credit score requirements of a direct lender, then a subprime car loan could be your next step.

Subprime Car Loans

Subprime lenders are third-party lenders, and they’re signed up with special finance dealerships. They cater to people with all sorts of credit challenges, including a past bankruptcy. Subprime lenders can work with unique credit situations because they look at more than just your credit reports when they determine your eligibility.

Once you find a special finance dealer with subprime lending resources, you submit some documents that prove you’re ready to take on a vehicle. The special finance manager verifies your info, then sends it to either one or more subprime lenders that they’re signed up with. You never meet with the subprime lender, and they determine your eligibility for an auto loan remotely.

Instead of turning you away for financing after one glance at your credit reports, they examine your income, residency stability, require a down payment, and even take a look at your work history. By looking at multiple aspects of your financial well-being, subprime lenders are able to get a better picture of you as a borrower. This is precisely why they can work with bankruptcy borrowers, and those with major credit issues, like a past car repo or rough credit history.

Subprime lenders report their loans to the major credit reporting agencies, so, similar to a direct loan, you can improve your credit score with timely vehicle payments. Payment history is the most influential aspect of your credit score, so taking on new credit that’s reported and staying current on your bills is a great way to heal your credit after bankruptcy.

Start Your Post-Bankruptcy Car Shopping Now!

Before you head out and look for your next auto loan, check your credit reports and make sure that your bankruptcy is being reported correctly. If you were just discharged, it can take a little while for it to be reported. Bankruptcy borrowers who need a car loan immediately can bring their discharge papers with them to prove they’re in the clear for auto financing.

There are car loan providers that work with bankruptcy borrowers. Subprime lenders can usually assist people in unique credit situations, allowing many bankruptcy borrowers a chance to repair their credit after they’ve been discharged. Finding a lender that can work with you, though, can be a hassle. Let us help with that!

Here at CarsDirect, we’ve cultivated a network of dealerships that are signed up with bad credit lenders. To get connected to a dealer in your area, fill out our free auto loan request form.


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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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