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Finding Car Finance for Bankrupts

April 29, 2016

Has declaring bankruptcy left you feeling like you have no options left when it comes to finding a finance deal you can afford? Don’t panic – today, we’ll be taking a look at the ins and outs of car finance for ex-bankrupts – as well as exploring the ways in which lenders’ stricter criteria when it comes to loans for bankrupt people can actually help to ensure that you won’t be left in the red again.

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How bankruptcy affects your credit report

Depending on the level of bankruptcy that you file for, this ‘black mark’ can remain on your credit report for up to ten years. Bankruptcy can deliver a real blow to a person’s credit rating – with the potential to lower your score by anywhere from 160 to 220 points – meaning what was once a good credit score could become a fair or even poor one.

Lenders will likely use this credit score as a part of their criteria when determining whether you qualify for finance – making loans for bankrupt people more difficult to access in many cases, when compared with ‘low-risk’ applicants boasting higher credit ratings. Managing your new debts successfully will help to gradually increase your credit score, even if the bankruptcy itself is still visible on your report.

Car finance for ex-bankrupts

Regardless of the effects that bankruptcy can have on a credit report, car finance for discharged bankrupts is still a possibility. There’s no doubt that declaring yourself bankrupt will be more detrimental than a few missed payments – but bad credit car finance providers are often willing and able to find loans for bankrupts in spite of their financial difficulties of the past.

It’s worth noting, however, that loans for ex-bankrupts may come with increased interest rates – due to the higher level of risk that an applicant with a bad credit history poses. If you’ve got a poor credit score, you may also be subject to a higher initial deposit – but this will reduce the total balance of the loan, meaning you’re more likely to get approved.

When it comes to loans for bankrupt people, car finance lenders may also employ stricter rules surrounding repayment – such as charging early repayment and redemption fees. These charges can be as much as one or two month’s interest – however, the sooner the loan is repaid, the higher this fee will be. This is due to the interest component of the loan repayment making up a higher proportion of the total amount to be repaid – and these fees can end up considerably increasing the cost of your loan.

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Bad credit car finance

A less-than-perfect credit score doesn’t have to stop applicants with a history of financial difficulties from securing a competitive car loan. In fact, many lenders offer car loans for bankrupt people and those with a lower credit rating, giving applicants in this position an opportunity to buy the car they want and rebuild their credit score in the process.

Bad credit scores suggest to lenders that the applicant will be more of a higher financial risk – but provided you can afford the repayments, there’s likely to be a loan out there for you. At The Car Loan Warehouse, we have a number of relationships with lenders who offer ‘guarantor loans’. By nominating a willing friend or family member as a guarantor, they will be responsible for any missed payments – making your loan application even simpler.

Bankruptcy doesn’t have to mean the end of the road for car finance – apply online today with The Car Loan Warehouse to see what our friendly and professional team of advisors can do for you.

Not ready to commit to an application just yet? Try out our car finance calculator for a personalised online quote.

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About The Author

Jon Le Roux is co-founder and company director of The Car Loan Warehouse. Being a mad engineering and motorsport enthusiast, I spend more hours than is healthy, watching, reading or talking about cars, boats, motorbikes…..basically anything with an engine.