If you just got out of bankruptcy and need a new car, the good news is that you can get a car loan. However, you will need to do some work before you can drive home in a new car.
We’ll show you what needs to be done. Don’t worry, there are choices, but you have to stay with us until the end.
Starting from scratch
If you file for bankruptcy, you can start over. You are no longer legally required to pay your creditors, but the bankruptcy will stay on your credit report for the next seven (7) years.
When lenders do a hard pull on your credit report, they will see that, so you need to start building a good credit history.
How to make your credit score better
Since you don’t have any active credit, you have to start over. Sign up for a secured credit card with a company like Home Trust or Capital One to start building credit.
These companies offer secured credit cards that work just like regular credit cards, but you have to put money into an account first.
The amount you put in is your “credit limit,” so the more money you put in, the higher your limit.
The secured credit card works just like any other credit card. Every month, you will get a bill that needs to be paid. If you pay the bill on time and in full, your credit score will start to go up after a few months.
Figure out how much you can spend on a car
Do you know how much you can put toward a car loan each month? The average monthly payment on a car loan is well over $500. If you don’t have a budget yet, now is a great time to start making one.
You need to set aside money for more than just the monthly car payment. You also need to pay for maintenance, insurance, and gas.
Because of inflation, gas costs about $2 per litre in Canada, so you will need to set aside more money for that.
If your debts are more than 40% of your gross income, lenders won’t give you a loan. If you made $10,000 a month, you could pay off no more than $4,000.
Since you filed for bankruptcy not too long ago, your total debts must be pretty low.
How to get a car loan after filing for bankruptcy
Most lenders won’t give you a second chance after you’ve gone bankrupt. So going to a car dealership is your best and, really, only choice.
Many Canadians have been helped by the dealerships, and they will be able to help you as well.
You will need to set up a meeting as soon as possible with the dealership. The credit experts on staff will show you what you need to do to improve your credit score so that you can get the best interest rates in the future.
Now that you know how to get a car loan after bankruptcy, you should take our advice and call the dealerships right away.
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!