Get Approved for a Car Loan After a Bankruptcy

By: Jason Lancaster


Filing for bankruptcy, while often a good idea, is usually considered "financial suicide". In fact, a lot of people believe that bankruptcy will lead to 7 years of bad credit and embarrassment. Some even think that they'll never be able to buy on credit again.

These warnings are FALSE.

While filing for bankruptcy definitely hurts your credit, you can overcome most of the harmful effects in as little as one year. If you know how to work the credit system, you can have good credit again soon.

1. Put you house in order.

Come up with a budget and a savings plan. You need to figure out how you're going to save. Also, make sure all of your old creditors know that you no longer owe them money. If they send you a collection notice, take care of it right away. Finally, reflect on what caused you to file bankruptcy in the first place and make sure you don't repeat the same mistakes.

2. Start hoarding cash and saving paperwork.

You'll need to save as much cash as possible as quickly as possible. You need cash to get a secured credit card, for a vehicle down payment, and also for an emergency fund. You also need to hoard all of your financial documents. That means your bankruptcy paperwork, your bank statements, pay stubs, and all of your bills. Keep them organized and in a safe place because future creditors may ask for copies.

3. Time for a secured credit card.

Once you're able to save up a little bit of cash it's time to get a secured credit card. Secured credit cards are credit cards secured by a cash deposit, with the amount of your deposit being the amount of available credit. The key to these cards is to use them only once and then destroy them. When your first bill comes, pay the card in full. By doing this you'll trick the credit reporting agencies into giving you credit for making payments in full every month, even though you've only used the card once. By destroying the card, you make sure your balance stays at zero.

4. Purchase a cheap used car.

Choosing an inexpensive pre-owned car is the easiest way to get approved for a loan. It's also the best car to buy if you plan on trading it in within the next year. Ideally, you would buy a cheap car and then trade it after 6 to 12 payments have been made. This way, you'll get credit but you don't have to keep the car forever. By going used and cheap, you'll lose less money when you trade it in.

5. Apply for more credit.

If you have a secured credit card (or two) for a few months and your car payment has been paid a couple of times you probably qualify for a regular, unsecured credit card. Make sure to apply for a card from the big names like Visa, MasterCard, or Discover. Whatever card you get, it's important that there is no annual fee. You should also try to get a credit card from your local credit union. If your application is denied, that's OK. Most denials are based on computer analysis which is often incorrect. Simply call the credit card company and ask them why you were denied and what you can do to get approved. Often times your denial will be overturned.

6. You can now get the car you want.

You've done all the steps, a year or so has passed, and your credit is officially re-established. Trade in that cheap car you bought in step four (unless you like it of course) and get something that you want with the benefit of having good credit.

With all of these steps, it’s important to remember a couple of things. First, save money every month. Saving money is a life skill that everyone should have. Second, remember what caused your bankruptcy and don’t let it happen again. Use a budget, avoid impulse purchases, and make sure that you can pay all of your bills even if a major catastrophe occurs.

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Information about the Author:

About the author: Jason Lancaster has nearly 10 years of experience in auto finance. He has helped hundreds get a car loan after bankruptcy and knows how the credit system works for bankruptcy car loans.
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