How to Get a Car Loan After Bankruptcy in Canada
Financing a car after going through bankruptcy doesn’t have to be stressful, especially when there are companies out there that can help you.
It’s a common misconception that filing for bankruptcy means you are financially ruined and won’t be able to rebuild your credit or obtain a car loan in the foreseeable future. This idea is far from the truth.
According to the Government of Canada, 1 in 6 Canadians will file for personal bankruptcy or file a consumer proposal at least once, so it’s a lot more common than you think. If you feel a little embarrassed or afraid of how this will affect your relationships with lenders in the future or whether you’ll ever qualify for a car loan, you don’t have to be. But there are reputable lenders out there that can help you get approved for an auto loan. In fact, Canada Drives has dedicated programs for Canadians facing bankruptcy and other credit problems.
Filing for bankruptcy means wiping out most of your debts, and the bankruptcy will stay on your credit record for up to six years. Despite this, it is possible to obtain a car loan at a reasonable interest rate.
Managing your expectations
While it's less likely that you'll be approved for an expensive new car, there are still some good options available out there for people who have gone through bankruptcy.
However, it’s important to be realistic and understand that by filing for bankruptcy, you won’t qualify for the same loan terms as you would have otherwise. Be aware of the terms of your loan, which will be different compared to a person with better credit history. As you are considered high risk after a bankruptcy, your interest rate will also be higher.
It’s also important to keep in mind that the process of buying a car may take a little extra time because lenders will require some information from your trustee. However, if you work with the right company—like Canada Drives—the process should be pretty painless.
Finding the right lender after bankruptcy
If you have just recently gone through bankruptcy or consumer proposal, you won’t have to wait years to get financing for a vehicle. In fact, obtaining a car loan and maintaining your monthly payments can help you with rebuilding your credit. At this point, the most important thing is to avoid other bad debts or negative payment history.
The last thing you want to do is invest time hopping from dealership to dealership being turned down or going to bank only to hear “no.” This is not only frustrating but can also adversely impact your credit.
Getting approved for a car loan after bankruptcy is a lot easier than it used to be. For example, with our massive network of prime and subprime finance partners (including some of the Big 5 banks), Canada Drives can help any Canadian find the right car and lender, regardless of their credit situation.
Simply provide a few quick personal details and we will be able to determine which lender can offer you the greatest chance of approval.
Getting your credit report and credit score
Although it may be daunting to get your credit information, it’s a good idea to get an understanding of where you’re at after bankruptcy. After all, the lender will be checking your credit, so you’ll want to see what they are looking at and ensure there are no mistakes, which can happen.
You can obtain a free credit report and score online. Your credit report includes information about previous auto loans, so pay attention to those details. The credit-scoring models used by auto lenders are heavily weighted in the credit score, meaning positive on-time monthly car loan payments will work in your favour when re-establishing your credit.
Refinancing your car loan
Don’t forget, you will have the chance to refinance your car loan at a later date.
You’ll want to keep an eye on your credit score, as you may be able to refinance your car loan at a lower interest rate in the future. If you continuously make on-time payments to your car loan, you will see your score improve after 6 to 12 months.
Get started today
Financing a car after going through bankruptcy doesn’t have to be stressful, especially when there are companies that can help. Thanks to our extensive network of finance partners, Canada Drives can help most credit situations with special financing programs.
Get started by completing our 2-minute online application and get pre-approved in as little as a few hours.