While declaring bankruptcy is generally a last resort option, countless unavoidable life circumstances can lead many Aussies to file for bankruptcy.
If you’ve been through this process and are now a discharged bankrupt needing vehicle finance, you may ask, “can I apply for a car loan or a short-period loan if I have been bankrupt?”
We’re here to tell you that you can!
It’s possible to get used or new vehicle finance after bankruptcy. Everyone deserves a second chance, and here at Finance One, we can help make second chances happen for those with bad credit.
Apply Online NowUnderstanding your insolvency options
If you’re in the unfortunate position of comparing your options for insolvency, we provide a little more information below:
Temporary Debt Protection (TDP)
If creditors are knocking at your door (or inbox), a TDP provides you with protection for 21 days from being pursued by creditors, until you can work through your options.
A Personal Insolvency Agreement
Personal Insolvency Agreements are between you and your creditor, where you make an agreement to pay an amount agreed upon, either in a lump sum or through instalments.
Part IX Debt Agreement
A Part IX Debt Agreement (also known as a debt agreement) is a formal agreement with your creditors, however, is handled by a third-party administrator on your behalf. In a Part IX Debt Agreement, the administrator proposes an amount to your creditors. Instead of paying each creditor individually, you make payments to your registered debt agreement administrator.
Part IX Debt Agreements are not considered to be the same as bankruptcy, however, they will still show on your credit report for five years from the date you enter into the agreement.
Bankruptcy
When you declare that you cannot pay your debts, the formal process is known as bankruptcy. Once you’ve declared bankruptcy, you may be legally released from your obligation to repay some of your debts.
In Australia, your period of undischarged bankruptcy lasts for three years and can seriously impact your ability to borrow money in the future. Once your period of bankruptcy ends, you’re considered ‘discharged’ and are referred to in the credit world as a ‘discharged bankrupt.
How does declaring bankruptcy affect my credit file?
Once declared bankrupt, you can be given a fresh start by being legally released from most outstanding debts. There are, however, some serious impacts of declaring bankruptcy:
- Your credit rating is seriously impacted.
- The details of your bankruptcy remain on your credit file for up to five years.
- Your details will appear permanently on the National Personal Insolvency Index (NPII).
- Depending on your profession or trade, having previously declared bankruptcy can restrict your employment options.
Finance One is a specialist lender that can help people with bad credit (including discharged bankrupts)
If you require car finance or personal finance after you have been discharged from bankruptcy, we can help.
Apply Online NowSix tips for improving your credit file after bankruptcy
For those looking to turn the corner after bankruptcy, steps can be taken to build their credit file back up.
1. Create a budget and stick to it
Sitting down and setting a budget is a great way to monitor your income and outgoings, build up your savings and demonstrate that you are responsible with your income. Seeking professional advice from a financial practitioner can also be beneficial regarding cash flow and budgeting.
If you’ve gone through the bankruptcy process, you’ll likely have come across some resources for financial counsellors. Financial counselling is a wonderful way to set proper habits to lay a foundation for a solid financial future.
2. Stable employment
Holding a stable income is a great way to build financial security and improve your credit rating.
3. Reduce loan applications
Make sure you do your research before applying for finance. Even after you’re discharged from bankruptcy, excessive credit applications can negatively impact your credit score as it can demonstrate to lenders that you are living outside your means.
4. Make any credit repayments on time
Did you know that paying your utility bills, such as phone, internet, gas or power, can influence your credit score? Ensuring you make timely repayments on any accounts will generally positively affect your credit score.
5. Keep your bank account in the green
Your bank account conduct is now recorded on your credit file. Keeping your bank account in the green can help keep your credit score stable and avoid overdrawing fees from your financial institution.
6. Find a specialist lender for bad credit car loans
Obtaining bankruptcy car finance can help build back your credit rating if you make all repayments in full and on time. Car finance for bad credit applicants can help provide evidence that you can take out further loans and make the required repayments.
As mentioned above, applying for multiple credit products quickly can harm your credit score. This is why it is important to find a lender willing to work with you as a discharged bankrupt.
How hard is it to get a bankruptcy car loan?
As you may expect, loans for discharged bankrupts aren’t a carbon copy of every other form of vehicle finance out there. This doesn’t mean a discharged bankrupt applicant can’t borrow money for a new car. Working with a bad credit lender is a great way to give yourself the best chance of accessing a discharged bankrupt car loan.
At Finance One, we welcome vehicle finance applicants who:
- Have a regular income, even if it’s self-employed income or from Centrelink.
- Need to borrow between $5,000 – $75,000.*
- Are at least 18 years of age.
- Have defaults on their credit file, have poor credit or are discharged from bankruptcy.
Frequently asked questions about getting a discharged bankrupt car loan
Will the interest rates be higher for discharged bankruptcy car loans?
Typically, interest rates for discharged bankruptcy car loans are higher than loans offered to borrowers with good credit. This is because lenders view individuals with a bankruptcy history as higher-risk borrowers. This is what makes it so important to shop around and access specialist lenders, to find the best rates and terms available to you.
What documents do I need to provide when applying for a discharged bankruptcy car loan?
When applying for a discharged bankruptcy car loan, you will typically need to provide documents such as proof of income, employment verification (if relevant), proof of residence, identification and possibly documentation related to your bankruptcy discharge. The exact requirements will vary depending on the lender.
Are all bad credit car loans 'secured' car loans?
Most car loans that are provided to bad credit borrowers are secured car loans. Using the vehicle as security helps reduce the risk of the loan defaulting. Discharged bankrupt car loans are a type of bad credit loan and, therefore, typically secured car loans, which means that the lender may be able to repossess the car in the unlikely event that you’re unable to repay the loan.
Apply for a Bad Credit Car Loan with Finance One
Many lenders provide car loans and personal loans, however, Finance One is a specialist lender who can help people with bad credit, including discharged bankrupts.
If you require car finance or personal finance after you have been discharged from bankruptcy, we can help. At Finance One, we understand that life can be rocky sometimes, and a bad credit history is not always representative of your credit future. We’re passionate about helping people get back on track and giving them a second chance at finance.
Contact our understanding team today to find out more about how we can help you purchase a car after bankruptcy.
Apply Online Now*Loans between $50,000 – $75,000 must be asset backed.
Normal lending criteria apply. Fees and charges are payable. Terms and conditions apply.
Finance One means:
Fin One Pty Ltd – ABN: 80 139 719 903
Australian Credit Licence: 387528
Disclaimer: The information above is of a general nature only and does not consider your personal objectives, financial situation or particular needs. You should consider seeking independent advice regarding your legal, financial, taxation or other needs, to check how the information relates to your particular circumstances. We do not accept responsibility for any loss arising from the use of, or reliance on, the information. All loan applications are subject to normal lending criteria. Fees and charges payable. Terms and conditions apply.
