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How to buy a car when you just got out of bankruptcy

How to buy a car when you just got out of bankruptcy

Bankruptcy laws were created to help Canadians get a new financial lease on life if they have fallen on hard times.

Our Copetown car loans team are going to discuss what steps you will need to take to get approved for a loan after being discharged from bankruptcy.

If you have not received your official bankruptcy discharge from your insolvency trustee, there is nothing anyone can do to help because legally, you cannot take on any new financial commitments.

Things to do right after receiving your bankruptcy discharge

The first thing you should do is sign up for a secured credit card with both Capital One and Home Trust Bank. Home Trust offers a Visa, and Capital One offers a MasterCard.

You will need to deposit money into these accounts, which act as a surety and gives you a credit limit to spend from.

These cards are not the same as pre-paid credit cards. With these secured credit cards, you will be able to start rebuilding your credit score.

Having the right mix of credit products

The secured credit cards are a great first step when trying to rebuild your credit, but credit cards are just one type of credit product.

You also need to add instalment loans to the mix so your credit score can bounce back quickly.

No lender will give you a loan that falls under the instalment loan category, but there are services like the Koho credit building program that will report an instalment loan to TransUnion for $7 per month for a period of six months; if you miss any payments, it will be as if you miss a real payment and it will hurt your credit.

Assessing your income

You’ve done the necessary work to raise your credit score and now just need to wait a little while for things to take effect.

While you are waiting for your credit score to improve, you can take a moment to look at your income.

How much cash each month do you have left over after you pay your basic expenses? Your debts should have been wiped out with the bankruptcy, so you are only left with your basic bills.

The average car payment is over $500 per month, so you need to budget for that plus the running costs like insurance and maintenance.

You do not want to fall back into major debt after coming out of bankruptcy.

Getting the expert advice you need

It would be a smart move to work with a dealership in your area, one that works with others who have gone through bankruptcy.

These dealerships will be able to structure your loan in such a way that you will get the best deal based on your situation. Since your credit score is in recovery mode, in a year or so, provided you pay everything as agreed, you will be able to start enjoying all the benefits that good credit offers.

When you’re ready for a car lease or loan, get in touch with the Copetown auto loan experts at Northway Ford for great deals on auto finance.

Categories: Car Loan

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