After you’re discharged from a bankruptcy, your credit score has likely suffered. However, there are lenders that work with bad credit borrowers and those who were recently discharged from a bankruptcy. To be prepared for a trip to the dealership, we’ve got a list of common requirements requested by bad credit auto lenders and how to prove you’ve completed a bankruptcy.
Bad Credit Auto Loans
Depending on which bankruptcy you filed, your credit reports could reflect a bankruptcy filing for a few years after you’ve been discharged. But once you’ve completed a bankruptcy successfully, you can usually get approved for a car loan rather quickly.
However, not all lenders are willing to work with credit-challenged borrowers. Some direct lenders, such as banks and credit unions, typically only approve borrowers with good credit. After a bankruptcy discharge, a subprime lender could be your way of getting an auto loan since your credit is likely poor after the bankruptcy filing.
Subprime car loans are for those with poor credit scores, or those with unique credit situations. The lenders that provide these loans use more than just your credit score for approval consideration. However, you must meet the subprime lender’s requirements, and prove you’ve been discharged from a bankruptcy.
Proving a Bankruptcy Discharge
Once you’ve completed a bankruptcy, it usually takes about 30 days for it to reflect on your credit reports. If you need a vehicle right away, you can request a copy of your discharge papers to show your auto lender.
To request your discharge papers, have your case number handy to make things easier. There are a few ways to get your discharge papers:
- Through the mail – Typically, you receive a copy of your discharge papers in the mail, and so does your trustee.
- Clerk of your court’s office – Be prepared to pay a fee to the clerk for retrieving your papers.
- Public Access to Court Electronic Records – Also called PACER, this online service can be used by your court’s clerk, or you can access it yourself. Expect to pay a “per-page” fee, or pay to have files downloaded electronically.
Once you get your discharge papers, there are a few other things left to assemble before you’re considered for a car loan approval by a subprime lender.
Requirements of Subprime Lenders
Getting your discharge papers could take a little work, but gathering the rest of your documents needed to get approved for an auto loan is relatively easy. Most things you need for the lender are likely in your home already.
Although bad credit lenders vary, they generally require:
- Driver’s license – Must have your current address listed and be valid, meaning it's not revoked, suspended, or expired.
- Check stubs – Most recent computer-generated check stubs, with year-to-date income listed.
- Income minimum – A minimum monthly income of $1,500 to $2,000 (before taxes).
- Proof of working phone – Proven with a recent cell phone or landline bill in your name. Prepaid phones aren't accepted.
- Proof of residency – Proven with a recent utility bill or bank statement in your name, with current address listed.
- Down payment – A down payment of at least $1,000 or 10% of the vehicle’s selling price, sometimes whichever is less, is generally required. A trade-in with equity can help meet this requirement.
Your lender may require more documents in order for you to be considered for a car loan. Also, expect to have a list of references (usually between five to eight people) to give to the lender, with complete contact information.
Bad credit lenders also typically ask about your work history and residence history. The longer you’ve held down your job, the better – and the same goes for your living situation. Bad credit lenders are looking for stability in their borrowers, since they use more than your credit score for approval.
And of course, don’t forget those discharge papers! Some lenders are hesitant to approve anyone with an open bankruptcy showing on their credit reports, and a discharge can take time to show up.
Finding a Subprime Lender
Once you’ve gathered your items and received your discharge papers, you’re halfway to qualifying for a bad credit auto loan. The next step is finding a dealer with a special finance department.
Not all dealerships have special finance departments that work with subprime lenders – but we know where they are. At Auto Credit Express, we’re teamed up with dealers all over the country that work with lenders that help borrowers in tough credit situations, including those with a recent bankruptcy discharge.
We want to help you find one in your local area for free. To get started, fill our out free car loan request form.