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Can I Get a Car Loan After Bankruptcy?

May 19, 2020โ— 5 minute readโ—
Can I Get a Car Loan After Bankruptcy?

If youโ€™ve declared bankruptcy and need help financing a new car, it can be difficult to know where to turn. There are specific financial providers that consider applicants who are currently or have been recently discharged from bankruptcy. Knowing which lenders to trust and navigating the loan market can be difficult. Letโ€™s take a look at some of the loan options that are available for getting a car loan after bankruptcy. 

What are the risks of applying for a car loan after bankruptcy?

Regardless of your current financial situation, taking out a car loan is always a big decision. All loans come with risks, but this is especially true if you have struggled with debt in the past. These are some of the most important things to pay attention to before applying for a car loan after bankruptcy.

Unreputable lenders

If you have a poor credit history, you may be looking for a car loan without a credit check. Unfortunately, any lender that claims to provide car loans without credit checks is an unreputable lender. All lenders are required by law to conduct credit checks in accordance with the responsible lending obligations by ASIC. Thankfully, online lenders like Jacaranda Finance can provide you with a bad credit car loan. These loans are usually accompanied by a higher interest rate. This will vary depending on your lender so itโ€™s important for you to do your research before you apply.

Unaffordable repayments

Before you decide to apply for a loan, you should consider whether the repayments will be comfortably affordable. If you apply for a loan that is unaffordable for your current financial position, a reputable lender will decline your application. This is again due to responsible lending guidelines that protect both lenders and borrowers from incurring debt that canโ€™t be repaid. You may be able to afford this by taking out a used car loan or cheap car loan

Submitting multiple applications

Every application you submit, whether you are approved or rejected, will show up on your credit report. When you apply for a loan or credit, your lender will view your credit report, creating a hard enquiry on your report. A hard enquiry will result in a short term dip in your credit score. Several hard enquiries will consequently continually impact your credit score. Applying for several loan applications within a short timeframe may further damage your credit score. This can also indicate to lenders that you are not in a good financial position.

Long-term consequences and legal trouble

If you sign a loan agreement, you are legally bound to all of its conditions until the loan and all associated fees and charges have been paid. If you fail to make your payments, the lender could instigate legal proceedings against you. 

Repossession of asset

When applying for a secured car loan, an asset must be attached to the loan as collateral. This is used as insurance for the lender so if you are unable to repay your loan, they will be able to repossess your asset and sell it to cover their expenses. This is usually only considered as an absolute last resort for lenders. 

How to get a car loan after bankruptcy

There are a few options for you to consider when looking for a bankruptcy car loan.

Personal Loan Some lenders may provide personal loans to people who have declared bankruptcy. However, this type of finance is usually restricted to specific types of purchases.
Business Loan Even if youโ€™re currently bankrupt, you may be eligible to apply for a business loan. Business loans are a type of loan that is larger than normal loans. The amounts can range up to $500,000 and are created to help finance a wide range of business purposes.
Car Loan You can get a car loan after bankruptcy from select lenders. Car loans are a type of personal finance and usually range between $10,000 to $50,0000, depending on the lender.

How to increase your chances of being approved for a car loan while in bankruptcy

There are several factors you should consider to increase your chances of being approved for a car loan after bankruptcy.

Employment

Different lenders have different employment requirements. If you are self-employed or part-time/casual, getting a loan could become difficult.

Centrelink

Though you can be considered for a car loan on Centrelink, lenders usually have restrictions regarding how much of your income is made up of benefits. Some lenders may only accept applicants if their income is less than 50% Centrelink payments.

Income

Even if you are bankrupt, you must have a stable income stream to qualify for a loan. This is so that the lender can be sure you will be able to comfortably repay your loan. 

Assets

Depending on how much you wish to borrow, you may be required to offer up an asset as collateral on your loan. This is what is referred to as a secured car loan. This means that if you were unable to make your repayments, the lender could repossess your asset. 

Guarantor

If you donโ€™t meet all of the criteria needed by the lender, you may want to apply for your loan with a guarantor. This can help increase your chances of getting online car finance for bankrupts.

Car loans with Jacaranda Finance

Jacaranda Finance offers car loans up to $35,000 for both new and used cars. We can provide car loans for discharged bankrupts, however, all of our applications are subject to a full assessment. We cannot guarantee approval, but we can guarantee you a fair go.

You can find more information about loans available for borrowers dealing with bankruptcy directly from the MoneySmart website.

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