Is It Possible to Get Car Finance While in Bankruptcy?

Bankrupt is lawfully declaring the inability to pay debts. Huge companies and even ordinary individuals who fail in their business can experience bankruptcy. This also includes people who have been unemployed for a long time. When a debtor is declared bankrupt, the next step is to allow the court to evaluate and measure their assets to help them pay their debts.

In getting finance for a car, lenders will check your credit and payment history to see your credit score. This is so they can decide if you can have a car loan or not. In general, bad credit will make your new credit application process slow and challenging to be approved by a finance company.

However, can you get car finance following a bankruptcy? Fortunately, yes, you can. It is possible to get car finance while in bankruptcy. There are instances where an individual can apply for new car finance after a year or two. It will be much easier for you to get the car you want even with poor credit or bankruptcy with the debt advice of a finance company that offers bad credit car finance.

What Happens to Your Car When You Are Declared Bankrupt?

During bankruptcy, the vehicle you owned or currently paying will either be sold or stay with you. The receiver will evaluate two situations to decide on what will happen to the vehicle. If the vehicle availability is essential to you or your family, there is a chance that your car will stay, but you should understand what is considered vital.

For example, your workplace or school is far from where you live. Or maybe it’s needed for medical reasons, and there is no available transportation that you can use. In this case, they will allow you to keep your car under your ownership. A finance agreement where you can purchase a car for less than £1,000 is even available, but only if having a car is essential to you.

However, in the UK, there is public transportation available almost everywhere. So, if you live near any of those, even if it’s a few blocks away, the lender or the receiver might take it and get it sold. Especially if it’s more than £1,500.

How Long Should You Wait Before Applying for Car Finance After Declaring Bankruptcy?

Under the Bankruptcy Restriction Order or BRO, bankruptcy will be on your credit history report for 6 up to 15 years if you fail to comply with the bankruptcy order as bad credit. The earliest bankruptcy discharge takes only 12 months. However, some lenders will ask if you ever declared bankruptcy for verification. In this sense, bankruptcy will always affect your credit application.

Debt Relief Order (DRO) is an excellent low-cost alternative to being bankrupt. DRO freezes your debts and interest for 12 months or a year and will be eliminated when the situation doesn’t change. In this period, the lender or creditors will not be able to ask for your payment. DRO is a legal procedure that will not require you to appear in court.

However, DRO is not available in all parts of the UK. It is also not suitable for every amount of debt, and you can only apply for DRO if the money you owned is not more than £30,000. Also, like bankruptcy, DRO appears in your credit history and will have a substantial negative impact on your credit rating and history.

In getting car finance after bankruptcy, it is essential and better to let it mature for a while. It will be difficult during the first year as bankruptcy is a poor credit history, but the result might differ in the next few years.

How Will Bankruptcy Affect Your Credit Report?

Maintaining a good credit report or history is essential in applying for car financing and every credit application. Once you have a good credit score, it will not be challenging to apply for credit or any funding. This credit report is part of a lender’s criteria in evaluating if your application will be accepted or not. That is why it should remain with a high credit score.

Bankruptcy is a form of bad credit – it means that the excellent score you built from the start might go down between 160 to 220 points and get a poor credit score. For lenders, it is riskier and more challenging to make or approve a loan agreement for ex-bankrupt people than low-risk applicants. There are also chances that you will pay higher interest rates due to your poor credit history.

Here is more advice that might help you to get a good deal following bankruptcy:

• Always pay on time – good payment history is always a massive plus to lenders.
• No multiple credit applications as creditors will always check your history and background, and having various applications might give you a negative impact on your credit rating.
• Register on the electoral roll, where lenders confirm your identity and financial background.
• Make sure you are discharged from bankruptcy.
• Make a savings deposit. The larger the deposit, the better.
• Always seek advice. There is nothing wrong with asking for help and advice from your family, friends, or professionals.

To get back the high credit rating, you need to have good management skills for your debts. Having a good finance company will get good debt advice and loan agreement whenever you need it.