How to Buy a Car After Bankruptcy in Ontario

How to Buy a Car After Bankruptcy in Ontario

Posted by on Feb 03, 2022 - Archived under Uncategorized

At first, it may seem like an impossible task to buy a car after bankruptcy . But we will show you there is a light at the end of the tunnel.


Have you received your bankruptcy discharge?


Legally, you cannot open any new credit accounts until you are discharged from bankruptcy. Your bankruptcy trustee will tell you when that will occur and provide you with these documents.


Re-establishing your credit


Once you have been officially discharged from bankruptcy, you should apply for a secured credit card. You deposit money, and those funds are your credit limit.


There are a few banks that offer these secured credit cards. You should open a few accounts. These accounts are the first step to rebuilding a positive credit score.


Your credit score will be very low, so it may take a few months before the score improves.


Calculating your car-buying budget


The average car will set you back nearly $50,000, so you will need to sharpen your pencil and figure out how much you can afford to pay every month.


Write down all of your current expenses, including rent or mortgage. After you have noted all of your debts (you shouldn’t have much debt since you are just out of bankruptcy), you will know how much cash you leftover monthly. This surplus cash is what you can put towards a car payment but don’t forget the operating costs of owning a new car.


Since your credit is fragile, you will not qualify for prime interest rates. Therefore, you cannot buy a brand new car and focus on a previously owned car. There are some fantastic deals on used cars, but the asking prices for used cars are high.


Something that you need to do is prepare your income documents. Your credit profile is not strong, so lenders are going to place a greater emphasis on your income.


When you buy a car after bankruptcy, be prepared to show your pay slips, income tax assessments, and bankruptcy discharge documents to lenders. If you don’t have these documents, your loan will be declined!


Where to find lenders


Many lenders focus on borrowers with perfect or slightly less than ideal credit. Unfortunately, the only way you will find lenders that offer loans to borrowers who just went bankrupt is by applying through a car dealership.


Not every dealership will provide these car loans. Therefore, you will need to try and identify those lenders that advertise these loans.


The dealership will ask you questions about what happened that caused you to go bankrupt. This conversation will give the dealership insight into your hardship’s root cause, which can be communicated to prospective lenders.


The dealership is not there to judge you. Instead, they are there to help you. There is life after bankruptcy. You need to take control of your finances and start making positive choices.


The quality of your life will improve dramatically after you buy a car after bankruptcy, so be sure to reach out to the dealership now.


For those of you who know that you have a challenging credit situation, please visit Dixie Auto Loans where we have a team of credit specialists ready to help you get approved for a car loan today!


For any questions or concerns, please don’t hesitate to contact us here! 


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