After you’ve completed a bankruptcy, you may think that your credit has taken too big of a hit to qualify for a car loan. But the truth is, after a bankruptcy discharge, you can often get an auto loan right away.
Bankruptcy Discharge and Car Loans
If your bankruptcy has been discharged, either a Chapter 7 or Chapter 13, this means you’ve completed it. This isn't to be confused with a bankruptcy dismissal, which means something happened and you were unable to successfully complete it.
Once you’re done either repaying and/or eliminating your debts, subprime lenders offer the resources for post-bankruptcy borrowers to start their next car loan.
Although your credit score is likely to be lower than it was before the bankruptcy, once you’ve completed it, you’re usually in a much better place financially. Completing a bankruptcy also shows lenders you were committed to getting your finances in order.
Immediately after a bankruptcy discharge, you’re in a great position to start your next auto loan, but you still have to meet some requirements to qualify. But not to worry – we’re here to go over what you usually need to get financed through a bad credit lender.
Proving a Bankruptcy Discharge
After your bankruptcy is discharged, you’re typically mailed the discharge papers. Since a discharge can take a little while to appear on your credit reports, keep those papers handy to prove to a lender that you’re no longer in bankruptcy.
If you need copies of your discharge papers, you can usually visit your court’s clerk office, or access them online. You can use PACER, which stands for Public Access to Court Electronic Records, to request and print copies of court documents online. Just expect to pay a fee to either your court’s clerk or through PACER to get copies of your discharge papers.
Once you have your papers, you also have to prove your income and living stability to a subprime lender. While you may be out of the woods when it comes to a bankruptcy filing, you’re still going to need a steady income and overall living stability to qualify.
Requirements of Bad Credit Lenders
Every lender is going to vary in their specific requirements, but most require similar items to approve you for a car loan after bankruptcy.
Here are the commonly requested items of bad credit lenders, in addition to your discharge papers:
- Check stub – A recent computer-generated check stub proving your income, displaying year-to-date income. The minimum monthly income requirement is generally around $1,500 to $2,000 before taxes.
- Down payment – Nearly every subprime lender requires a down payment of at least $1,000 or 10% of the vehicle’s selling price, sometimes whichever is less. The down payment doesn't need to be 100% cash. You can also use an equity trade-in to cover this requirement or help meet part of it.
- Utility bill – A recent utility bill is used to prove your residency, and it must be in your name with your current address.
- Working phone – Your lender needs to be able to contact you, so they require a working contract cell phone or landline phone, easily proven with a phone bill. Prepaid phones won’t be accepted.
- Identification – Proven with a valid driver’s license (not revoked, expired, or suspended).
- List of personal references – If you’ve been approved for financing, subprime lenders typically require a list of around five to eight personal references with complete contact information. These references can really be anyone, as long as they don’t share your current home address.
Once you’ve assembled these documents, the next step to getting into an auto loan post-bankruptcy is finding a lender that can work with unique credit situations.
Finding a Car Loan After Bankruptcy
It can be difficult telling the difference between a traditional and a subprime auto lender. Subprime lenders work through a dealership’s special finance department, but not all dealers have these lending options.
You could call or drive around to your local dealerships, but that can waste your hard-earned time and money. Instead, start with us at Drivers Lane. We already know which dealers work with bad credit lenders, and we’ve created a nationwide network of special finance dealerships.
To save yourself the time and hassle of locating a subprime lender, simply complete our free car loan request form, and we’ll work to match you to a dealer in your local area.