If you just filed Bankruptcy, you might immediately qualify for a car loan. In Canada, some applicants can qualify for a car loan the day after they file bankruptcy.

If you want to get financing immediately after filing bankruptcy, it will depend on a number of factors, including:

Providing proof of income when applying for a car loan in Canada is important but an equally important step is considering household debt. Monthly bankruptcy payments, rent or mortgage payments, car insurance and any other debt left outside of bankruptcy are all considered debt and most be disclosed to the lender.

Once they have full disclosure of your debts banks, mortgage brokers and auto finance companies use a special formula to determine affordability. The end result is called the Total Debt Service Ratio, which is commonly known as TDSR and TDS.

A major part of the Bankruptcy Loan Application Process in Canada involves auto lenders verifying employment. A finance company confirms income for two reasons, to ensure their customer is employed, receiving regular income and to confirm they can afford a new car loan.

This is how banks verify income in Canada:

Depending on credit history, bankruptcy information and the finance company, the loan process and credit requirements in bankruptcy can vary. If you’re currently in bankruptcy then you should review your financial situation with the trustee handling your file. You should only apply for credit in bankruptcy if you have the support of your trustee in bankruptcy.

If you’re in bankruptcy and you qualify for a car loan, then you will probably be charged a much higher interest rate than you would expect. This is because the credit risk for the bank is much higher when their customer is bankrupt.

When someone files bankruptcy they are alerting their creditors and their future creditors of their insolvency and, therefore, riskier financial status.

Getting a low interest car loan is a fairly simple process in Canada and many Canadians go through it every day. Getting a loan in bankruptcy is also something people do every day however its not as simple. Being in bankruptcy can make obtaining auto financing a far more complicated process.

A more complex process means there are many differences when bankruptcy is involved. The most significant differences between a regular loan and a bankruptcy loan are the interest rate and the application process.

A Car Loan Can Rebuild Credit after Bankruptcy

Rebuilding Credit in Canada

If you’re a Canadian with a bad credit score or you’re in bankruptcy then your credit is damaged.

Before you can repair your credit score, lower your interest rates or get out of debt, you need to rebuild your credit.

Deciding to Finance a Car in Bankruptcy

Even though a car loan can rebuild your credit history, you should only finance a vehicle if you need to.

Rebuilding damaged credit and re-establishing post bankruptcy credit are good reasons to get a car loan but they should never be the only reason!

The most important lesson you will learn at Bankrupt Car Loans Canada is to make your own financial decisions. If someone tries to tell you that you must finance a car loan after bankruptcy, then they are wrong.