Can I Finance a Car If I Have Been Declared Bankrupt?

Bankruptcy can impact your life tremendously. One of the many things that will be affected by this is your credit status and your ability to get car finance when you’ve declared yourself bankrupt. This can stay on your credit report for a considerable amount of time. 

There are many reasons why some people experience bankruptcy. It’s possible that you’re no longer able to work due to health reasons, your business failed, or you’ve made financial decisions that didn’t work out well. 

The law allows individuals to declare themselves bankrupt so that they can be protected from creditors who are hounding them. However, their assets can still be seized and then distributed to their respective creditors. 

How Bankruptcy Impacts Your Credit Score

Many people are not aware that bankruptcy can last up to six years on one’s credit report. When those six years have passed, the record of your bankruptcy will be removed. But before that happens, the bankruptcy should have been discharged and you should have complied with your Bankruptcy Order. Otherwise, the record can stay on your credit report for up to 15 years. 

Now, let’s say six years have elapsed and the bankruptcy is now removed from your credit report. Most car finance companies will still ask you whether you’ve been bankrupt or not. So, even if it’s no longer on your record, you still have to answer honestly and state that you have been bankrupt previously. But this does not mean you can no longer get car finance. 

Applying for Car Finance While Bankrupt

Even if your bankruptcy stays on your record for a number of years, as soon as you’ve been discharged, some restrictions will be lifted so you’ll have a few financial options. While you’re not yet discharged, you’re only limited to borrowing up to £500 without having to disclose your bankruptcy. 

But what if I’m already discharged? Can I apply for car finance? At this point, there are no longer limitations to applying for credit. However, the bankruptcy would have impacted your credit score negatively so, in realistic terms, it’s going to be challenging for you to get approved for financing and other loans. 

If you’re still in your first year of bankruptcy, it would almost be impossible to get car finance. But if you can wait for a couple of years, you’ll have a better chance of getting approved. Consider also if you’re under an Income Payment Agreement where you have to make monthly payments. It may not be practical to get car finance while you still have other financial obligations to take care of. 

Why It’s a Good Idea to Wait

Keep in mind that when you apply for car finance while bankrupt, you’ll most likely be rejected. When this happens, it will hurt your credit rating even more. It’s best to wait and rebuild your credit history so you can prove to the lenders that you can be responsible when it comes to handling your finances. 

It’s true that some lenders might grant you car finance but usually, it would have a high interest rate. It wouldn’t be practical to agree to a deal like that. Rather than enter into an agreement that’s going to be another financial obligation, you can devote the next couple of years to working on improving your credit score, paying off debts, and working on getting discharged from your bankruptcy. 

How to Prepare for My Car Finance Application

In rebuilding your credit history, you need to be patient. Your credit score won’t improve overnight. Be consistent in being financially responsible and make it a habit to check your finances regularly. Within a year or two, you’ll see that your credit score is steadily rising again and you’ll be in a better position to apply for car finance. 

Another thing you can do would be to get registered on the electoral roll. This may seem unrelated but car finance companies and other lenders check your personal details such as your name and address through it. Another step you can take is to set up a direct debit so that your utility bills will be paid on time every month. This way, you won’t risk forgetting when the due dates are. 

While you’re working on getting discharged from your bankruptcy, you can also save up money for the downpayment on the car. Save as much as you can so that you can pay a substantial amount. By doing so, you won’t have to borrow so much and your monthly repayment amount will be lower as well. Car finance companies will also be more inclined to grant you financing if you pay a downpayment. 

Lastly, keep in mind not to make too many applications for car finance. Before you apply, see to it that you’ve made a shortlist of car finance companies with the best deals. These lenders should have the lowest interest rates and good terms. Spend time studying their car finance deals so that you know what you’re getting into. Once you’re confident that you’ve picked the right lender, then that’s the time to apply for financing. 

Applying for credit within a short span of time will hurt your credit score because of the hard searches that the lenders will do on your credit report. Avoid this especially when you’re trying to maintain a good credit rating or you’re still trying to rebuild it. Don’t be in a hurry to apply. It’s best if you only do so if you’re confident you’ll get approved. 


Getting car finance while bankrupt may not be a good idea because it’s going to add to your financial burden. You may want to focus on improving your current situation first before you enter into a huge commitment like financing a car. 

Dealing with bankruptcy is difficult. To get the best advice for your specific situation, you can try to get in touch with a financial expert who focuses on bankruptcies. This way, you’ll be guided and advised adequately on how to go about it.