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Bankruptcy offers Canadians the opportunity to handle extreme debt and get a fresh start, free of their creditors. It does, however, come at a cost. After your bankruptcy is discharged, it remains on your credit profile for at least six years (for a first bankruptcy). As a result, it becomes a unique challenge to regrow credit and access new loans and credit after bankruptcy.
Despite this difficulty, the need for a car to commute, earn money, and drive children to and from school and activities remains the same. If this describes you, then the most important step is doing thorough research so you know what to expect when pursuing a car loan after bankruptcy.
The good news is that you can get a car loan after bankruptcy without waiting the full six years for it to be removed from your credit profile. Actually, when you are in the process of waiting for your bankruptcy to no longer appear on your credit report, you can take steps to rebuild your credit. The best way is to prove that you repay loans on time, every time. Because of the size of a car loan, it can help you grow your credit in a quite substantial way.
To get a car loan during bankruptcy, you will need some sort of collateral. Since all of your finances will be governed by a Licensed Insolvency Trustee, this will depend on your situation. However, after your bankruptcy no longer appears on your credit report, you will be able to get a car loan through almost any lender. Just keep in mind that your credit will likely still be low so banks and other traditional lenders may not want to approve you.
After bankruptcy, you can access a car loan through alternative lenders. It is important to remember that, resulting from the damaged credit score and the bankruptcy on your file, you won’t be able to access premium terms. Alternative lenders have higher interest rates, resulting in larger payment amounts. So long as you manage your payments and ensure that you can afford them, a loan will give you access to a vehicle while enabling you to improve your credit.
Amount | Interest | Term(Months) | ||
![]() | $500 - $50,000 | Up to 46.96% | 12 - 84 | Learn More |
![]() | $500 - $35,000 | $29.99% – 46.96% | 9 - 60 | Learn more |
![]() | $500 – $10,000 | 12.99% – 39.99% | 9 - 36 | Learn more |
![]() | $5,000 - $40,000 | Varies | 12 - 72 | Learn more |
![]() | $7500 - $59,995 | 3.95% + | 12 -96 | Learn more |
![]() | $5,000 - $45,000 | 4.90 % - 29.95% | 36 - 72 | Learn more |
![]() | Varies | 11.9% + | 12 - 84 | Learn more |
![]() | Up to $50,000 | Varies | 12 - 84 | Learn more |
![]() | Up to $50,000 | 8.99% + | 12 - 72 | Learn more |
In order to determine whether getting a car loan subsequent to your bankruptcy, it is important to assess the pros and cons of taking on a car loan.
Pursuing a loan with post-bankruptcy credit can be a stressful process. There are some steps you can take to boost your chances of getting a car loan.
The final step is very important. You need to take measures to protect yourself from falling back into a vicious cycle of debt. When you’re looking for a vehicle, especially for work reasons, it can be a very stressful process with a feeling of urgency. Unfortunately, there are predatory lenders who prey on vulnerable lenders. To mitigate this risk, be sure to do thorough research on the options which are available.
A good approach is to wait to finance until you have rebuilt your credit. Use the mechanisms available to you, such as secured cards, and pay down your debt before taking on any more. Finally, it is important to budget for the real cost of the car (over and above the loan). Consider the expenses including maintenance, insurance, registration, and fuel. Have a realistic budget so that you know what to expect in terms of the actual cost.
Construct a detailed budget that considers your income and expenses. Factor in the projected expense of the vehicle and determine whether getting a loan is the right way to go. You can make adjustments to your situation by improving your credit (to get a better interest rate). Alternatively, you can pursue a lower loan amount by adjusting the price range of the car you’re seeking.
Accessing a car loan after bankruptcy requires a substantial amount of prudence in terms of research and execution. Balance the benefits of having access to a vehicle with the risk of increasing your debt. There are ways to responsibly approach loans to mitigate risk and improve your quality of life. So long as you take your time, learn all about your options and are fully prepared, you can find loan terms that work for you both today and in the future.
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Loans Canada is pleased to announce it placed No. 131 on the 2022 Report on Business ranking of Canada’s Top Growing Companies.
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