When applying for car finance, lenders look at your reliability as a borrower. When weighing this up, they look at lots of things – from your current income to your credit report.
Financial difficulties can impact your ability to get car finance. But in most cases, adverse credit shouldn't be a barrier to getting the car you need – whether you need it for work, family or leisure time.
In the case of bankruptcy, you can get car finance after being declared bankrupt – but typically only once you've been discharged. This "discharge" usually takes place 12 months after the initial declaration.
Your credit score will be affected for up to six years – something that will likely make mainstream lenders look the other way.
It doesn't mean, however, that you can't get car finance. It just means that you have to:
- Take steps to improve your credit score
- Work with a broker like us that specialises in bad credit car finance
Can you get car finance while bankrupt?
It's very difficult to get car finance while still bankrupt. This is because lenders can't be sure you'll be able to make repayments and so view you as a risky proposition.
Once discharged, however, you're in a much better position to apply. This is because lenders – especially those that specialise in
bad credit car finance – look at your current affordability as well as your financial history.
Can you get car finance once you're discharged?
Once you've been discharged from bankruptcy – usually after 12 months – you can apply for car finance. Your best bet is to work with specialist bad credit car finance providers or even lenders that specialise in bankruptcy cases.
The 12-month period applies because after this time, you're considered a "discharged bankrupt". This makes you a more favourable borrower to lenders. It also gives you a chance to get back in the saddle financially before taking on car finance repayments.
Once you've been discharged, you don't need to disclose your bankruptcy to a lender. However, it's important to tell the truth if asked directly.
How long does bankruptcy stay on your credit report?
Most of the time, bankruptcy stays on your credit report for up to six years. After this, the record of bankruptcy is removed from your file.
If, however, you breach the terms of your Bankruptcy Order, bankruptcy can stay on your credit report for up to 15 years. This can happen if you exceed borrowing limits.
How can you improve your chances of getting car finance after being declared bankrupt?
Your credit file isn't a static document. It changes according to your current and future spending and borrowing.
This means you can take concrete steps to improve your credit score and, by extension, your chances of getting car finance.
The three main ways to do this are:
- Registering with the electoral roll
- Paying on time whenever possible
- Limiting the number of hard searches on your credit report
Working with a car finance broker can help by carrying out soft searches on your behalf. These are invisible to lenders, so they don't affect your credit report in the same way that a hard search (formal application) will.
What is a guarantor loan?
A guarantor is someone (typically a friend or family member) who promises to repay a loan if the primary borrower can't pay it back.
This is a big responsibility for the guarantor. A guarantor can, however, increase your chances of getting car finance after being declared bankrupt.
Can I keep my car after being declared bankrupt?
This depends on several factors, including:
- The value of the car
- Whether you own it outright
- Your need for it
If it's an essential vehicle, whether for work, childcare, medical reasons or a disability, you may be able to keep it. The same could apply if it's a low-value vehicle.
If, however, the car is deemed a luxury or has a high value, it can be seized and sold to repay creditors.
In some car finance agreements, clauses may apply allowing lenders to repossess the car in the event of bankruptcy. This can happen even if your payments are up to date. Whether this applies to you or not will be detailed in your finance agreement.
What is bankruptcy?
Bankruptcy is a legal process. If a person or business can't pay their debts, they're declared bankrupt. Non-cash items (assets) are converted into cash (liquidated).
Remaining debts are cancelled to give the bankrupt person or business a fresh start.
If you can't pay your debts, you can apply for a bankruptcy order. This generally involves paying an application fee.
An official receiver or trustee will then take control of your money, properties and valuable possessions. These are sold off to pay the people you owe money to.
In day-to-day speech, "bankrupt" means you have no money. In truth, however, people who have been declared bankrupt are allowed to keep:
- Essential items for day-to-day life
- Enough money from their income to cover living costs
Any surplus, however, can be taken to pay their debts for up to three years.
What is bad credit car finance?
Bad credit car finance is a special kind of loan for people with poor credit scores. This could be because of late payments, defaults, CCJs, low credit history or bankruptcy.
Bad credit car finance brokers provide loans to people who would be rejected by mainstream lenders.
How we can help
Here at Zoomo, we help people with bad credit to buy cars on finance. We provide a fast – and non-judgmental – service, working with our network of lenders to find suitable packages for drivers in Newcastle upon Tyne.
Do you live in the North East and are looking for bad credit car finance? Explore our fleet of
used cars for sale in Newcastle to get started.
