Bankruptcy is already the hardest of all financial conditions, above that, you come to know you cannot purchase the car on credit anymore. You can certainly purchase a car if you pay in cash, but this way you will be stuck with a mediocre choice (as you might not have enough cash). 

It takes a lot of time and effort to regain your credit score after bankruptcy. No matter the bankruptcy charges are under chapter 13 or chapter 7. The expert online car dealers say that after buying a car you can get a fresh start with your credit rating. Read the blog for more.

Filing Bankruptcy And Credit Report

Bankruptcy followed by damaged credit scores makes it even difficult to buy a car on finance. So, taking any step further, one should pause until the court discharges their previous debts or the files are closed. Fortunately, not all debts qualify for bankruptcy (like student loans). A car lender will dig deep into all the existing forms of debt before issuing a car on credit. Unfortunately, both chapter 13 and chapter 7 have a long term impact on the credit. 

The silver lining, once the case is closed, taking an auto can be a booster to re-establish a good credit score. Moreover, if a person successfully pays the loan it will be easier for them to purchase more items on credit. The car expert says that after a few years of regular on-time payments of the auto loan, you can refinance your car for a lower interest rate.

Direct Impact Of Bankruptcy On Vehicle Financing 

It is but obvious that life is difficult for borrowers with prior bankruptcy than a person with a good credit score. Any car dealership, lender or bank will want more security from a borrower with bankruptcy, certainly because they view borrowers as already in default and a flight risk.


1. Expect the car loan to have a higher interest rate and more downpayment than credit.  

2. The lender may want one or more cosigners (certainly with good credit). 

3. A cosigner is either a family member who is willing to take the default if you are not able to pay your instalments. 

Improving Credit Scores Before you Purchase A Car 

With improved credit scores before buying a car, an auto loan will not be that big of a deal. Although after bankruptcy raising the credit scores is slow, but a good credit history will make an impact. Good credit history means making all the payments on time, regular but not suspiciously excess use of credit cards. Even 6 months of regular, timely payments can bring credit scores back on a great track.

Good or bad credit score, before shopping for a car, borrowers should try to get a pre-approval for your auto loan. This somehow eases the burden when they are at the mercy of your circumstances.

Beware Of Predatory Lenders Or Dealers

With bankruptcy and a poor credit score, a borrower is already struggling to purchase a car on credit. The reason why some dealers and lenders offer higher down payments or interests is that they work hand in hand with vehicle dealerships. Having instalment plans directly financed by the dealers, to avoid higher risks, they ask for higher down payments and/or interest rates. On the contrary, some used car dealers prey on the condition of the borrowers by offering them to finance low-quality cars. Mostly, online car portals are the saviours.      

So as per the expert car dealers, what such borrowers could do is get a pre-approval on their auto loans that will make their lives easier. Else, pay in cash or get subprime loans. Though, if one is out of bankruptcy, the best way to improve credit scores is financing a car. With 6 months of consistent and timely payments, the credit scores will revive.