A Bankruptcy Car Loan: Everything You Need to Know

Why would someone need a bankruptcy car loan? Simple – personal insolvency.

A bankruptcy car loan happens more often than you might think. Back in 2017, the Australian Financial Security Authority found many people claimed personal insolvency thanks to issues with their business. People who fell short on capital or who mismanaged loans and loan payments seemed to fall into the category of bankruptcy more than anyone else. 

If you need to declare bankruptcy, you want to know how that decision can affect your personal assets, including a bankruptcy car loan. Most of us take out loans to pay for our main source of transportation, and if your business relies on your vehicle, that bankruptcy status could come back to bite you, hard.

Rather than wonder how bankruptcy could change your loan eligibility or up the possibility of repossession, scroll down for the facts. 

Table of Contents

Can you get a car bankruptcy car loan?

Car loans for discharged bankrupts

How to improve your financial health

Did you know that beyond business loans, the most common reasons Australians claim bankruptcy are personal, normally due to ill health, and borrowing too much money. You can see a full rundown of the government’s report here. 

Can you get a bankruptcy car loan? 

The short answer is, unfortunately, no. However, there are independent, used car dealers who offer things like no credit checks or bankruptcy car loans. 

These tend to be rent-to-own cars, or cars you lease and pay for month to month while keeping the car on your property. However, these monthly payments come with mountains of fees, and some lease-to-own deals end up costing the borrower much more than the value of the car. 

Banks won’t lend money to someone in bankruptcy as it demonstrates an inability to pay back loans or that you have a tendency to overdraw. The best thing you can do is wait out your bankruptcy and find another means of transportation. 

In the meantime, avoid anyone offering to help you with a bankruptcy car loan or bad credit loan. These can cost you incredibly high interest rates and keep you in the hole for much longer than if you simply cut back on your budget.

Bankruptcy car loans for discharged bankrupts

To get through your bankruptcy and have yourself labeled a stable individual by the bank, you need to stay in your current residence, hold down a full-time job, and save whenever you can. It’s not an easy task, but pushing through your bankruptcy can help loan officers give you a second look after your debts get absolved and get you your bankruptcy car loan.

You get discharged from your bankruptcy either by paying off all your outstanding debts, annulling your bankruptcy, or by waiting out the three years of your bankruptcy status. Both automatically free you from this category and let you apply for loans again. 

A bank won’t run to loan you money even after your status changes. Your bankruptcy stays on your financial record for years and your name gets listed on the National Personal Insolvency Index, (NPII), even after you pay your debts, so don’t apply for your bankruptcy car loan until you speak with a loan officer.

With that in mind, you might choose to go to a private lender. Many of them do lend to people with a history of bankruptcy, but that doesn’t make them generous. Do your due diligence and research each lender. 

Read reviews of different companies, ask family and friends if any of them can work out a small loan and repayment plan with you, and try to find other solutions. These small, high-interest loans often hurt borrowers more than they help, even if that car helps you stay employed or run a business.

How to improve your financial health

After you get your discharge, the bank and your personal trustee hope to see you in better financial shape than before. You certainly don’t want to circle back to being broke, so you need a plan. 

There are a few basic steps you can take to get your money and your spending habits in order. Here’s a quick cheatsheet to get you started:

• Keep a spending journal – before you can make any major changes to your budget, you need to take a hard look at how you spend. Do you tend to order delivery on Wednesdays? What’s the one thing you buy more than anything else? A spending journal gives you hard data on how you spend and why, and that will help you know what to change.
• Start a pocket system – Also called a bucket system, this makes you set aside money for specific expenses like rent, groceries, weekend money, etc. Then you need to decide how much money goes into each for you to consider it complete. Then, each time you get paid, you put a little bit of money into each one until it’s full. This lets you avoid overspending your money. 
• Care for your change – What do you do with your spare coins? Come up with a way to save those coins so you can see, (or feel), your money accumulating in a special container. That process creates delayed gratification, or a reward you earn slowly, so you can eventually buy something for yourself. 
• Ask for money-saving advice – Check in with your family members or friends who never seem to stress about money. Ask for tips about where to shop or what products to look for to save money. One tip from us – always shop with a list! Lists help you avoid impulse buys and spend less at the shops. 

Are you ready to get back on track?

A personal accountant can help you find ways to save, make smart money moves, and finance your business without going broke. Contact us today for more information on accounting services designed to help you feel good about your funds. 

Click here to get started.