Car Dealers That Deal with Bankruptcies
Although many traditional car lenders might be cautious about working with bankruptcy debtors in the future, there are likely more options than you realize. Dealers don’t approve auto loans, and they won’t be too concerned if you have filed for bankruptcy.
Bankruptcy Auto Loans and Car Dealers
The auto lender approves or denies you a loan for a vehicle. They also look at your credit report and whether you have ever been in bankruptcy. Dealerships often only want to sell you a car.
Many dealers have relationships with third-party lenders. Some even work with bankruptcy lenders. We can help you find the right lender, even though these financing options may not be available at all dealerships.
There are three main financing options available to bankruptcy debtors:
- A cooperative credit union
- Special financing dealer
- BHPH (Buy Here Pay Here) dealership
Banks and credit unions offer direct car loans. They work directly with you and can provide a range of credit criteria, some more strict than others.
Credit unions, which members own, are generally more flexible than banks. If you have a bankruptcy record, however, it might be challenging to get approved. If you have a good track record and are a long-standing member of a credit union, they might be able to lend you money.
If you’re accepted for a direct loan from a credit union, this is usually considered a pre-approval. You can go to a dealer and shop just like you would if you were buying cash. The dealer doesn’t care about bankruptcy because you have a preapproval letter from the lender and are ready to purchase a car.
Dealership for Special Financing
Most dealerships partner with third-party lenders to finance customers. Special finance dealers that specialize in financing for people with poor credit are also known. These dealerships work with lenders who consider more than your credit history when you apply for car financing.
The dealership has a dedicated finance manager who acts as an intermediary between you and the lender. Although you may not meet the lender in person, they will review your credit report, pay stubs and residence information. They will also request a down payment. If you are eligible for financing, you will work with the dealership to select a vehicle and sign a contract.
BHPH dealers can also act as your lender, which is different from traditional dealerships. This is known as “in-house financing”. The dealer handles the financing and vehicle purchase.
However, they won’t usually look at your credit reports. The dealership might not be concerned about your bankruptcy because they won’t use your credit history for evaluating your eligibility to get a car loan.
For those with bad credit or bankruptcy, in-house financing is an option.
Although many bankruptcy borrowers find it attractive that there is no credit check, some drawbacks are also. BHPH dealers may charge higher than average loan rates and require a down payment of up to 20% of the vehicle’s price.
These dealerships don’t check credit records, so the loan may not be recorded to credit agencies. Before signing any documents, make sure to read the reporting policies of your dealer if credit restoration is essential to you.
A BHPH dealer may be the best choice for you if your bankruptcy did not go according to plan or you have severe credit damage.
What happens after you file for bankruptcy?
The outcome of your bankruptcy and continuing it can impact your approach to your next car loan.
- Discharged. You may be eligible to finance via one of the three options above if your bankruptcy was successful. A vehicle loan can usually be obtained immediately after your bankruptcy is discharged.
- He was dismissed for prejudice. If your bankruptcy was dismissed with prejudice, you might not have a chance to deal with a BHPH dealer. You wouldn’t be allowed to deal with most car lenders if your bankruptcy was dismissed with prejudice.
- The case was closed without prejudice. Your bankruptcy case was dismissed without prejudice if it is not due to clerical errors or you have neglected to file any paperwork. Re-applying can usually fix the problem.
- It may be a good idea to wait until you have completed Chapter 7 bankruptcy before applying for a vehicle loan. Many lenders won’t accept applicants in Chapter 7 bankruptcy. It is a good idea to wait until your bankruptcy is over before applying for a car loan. This usually takes between four and six months.
- Chapter 13 bankruptcy is still available. Chapter 13 bankruptcy can last for many years. During that time, a lot of things can happen. There are ways to obtain a car loan if you need one while you are in Chapter 13. Although direct lenders will not lend to a Chapter 13 borrower, subprime auto lenders or BHPH dealers may help.
Are you looking for a car dealer?
Now is the time to find a dealer that will work with you. This will allow you to know which path you might take depending on your bankruptcy status. Although this can be difficult, BankruptcyHQ has developed a way to locate the bankruptcy financing options many debtors require.
We have a nationwide network of dealers that are bankruptcy experts. To be matched with the right vehicle dealer in your area, fill out our car loan request form. We’ll take care of the rest. It’s completely free, secure, and you don’t have to sign anything. Get started right now!
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