How Getting Car Loans After Bankruptcy Is A Real Possibility

Declaring bankruptcy is traditionally seen as the surest way to convince lenders to steer clear. But the idea that it ends any hopes of securing a future loan is not quite right, and even before the usual 2-year term of the bankruptcy ends, there are options. Getting a car loan after bankruptcy, for example, is not that difficult.

As with all financial matters, there are conditions and criteria to satisfy before approval can be granted, but the fact remains that an opportunity to buy a new car is available to bankruptees. But what is needed in order to secure loan approval despite bankruptcy?

Well, the lenders are obviously accepting a higher degree of risk than usual, so there are some special conditions involved, as well as higher interest rates. But the car loan can be secured as long as the affordability factor is proven and a means of repaying the loan is assured.

Proving Affordability

Whenever someone applies for a loan, the lender is always more interested in establishing that the repayments are affordable to them than what their credit history is like. There are 2 parts to establishing affordability: the income and the debt-to-income ratio of the applicant. Getting a car loan after bankruptcy depends to these matters too. You can also look for car loans after bankruptcy online as well.

Income relates to employment, and applicants must have a full-time job before they will be considered for approval despite bankruptcy. The income itself needs to be sufficient too, but the employment stability is perhaps more important. So, recently hired people (within 3 months) are likely to be overlooked.

The debt-to-income ratio relates to excess income, or the existing monthly expenditure compared to the monthly income. The ratio stipulates a maximum 40% of income be spent on debt repayment, so the car loan repayments must fall within a tight limit. If it does not, then the application will be rejected.