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I would like to borrow
£1,500
To pay back over
3.5 years

Representative Example: Borrowing £5,500 over 48 months with a representative APR of 19.8%, the amount payable would be £163 a month, with a total cost of credit of £2,283 and a total amount payable of £7,783.

Can I get a car loan while in bankruptcy?

Becoming bankrupt has serious consequences for your finances. The trouble is, just because you’re having money problems, it doesn’t mean you can do without a car.

With that in mind, we’ll explore whether or not it’s possible to get specialist bankrupt car finance – and what the options are for car finance for discharged bankrupts in the UK.

What happens to your car when you’re declared bankrupt?

Although this question relates to getting finance while you’re in bankruptcy, it’s helpful to understand the restrictions that are put on your when you’re made bankrupt.

If you own a car or you’re paying for one through a current finance agreement, the receiver who’s handling your bankruptcy will make a decision about how important keeping the car is for you. Generally, you’ll only be allowed to keep a car of any kind if you can’t do your job without it; you or someone in the house needs it because of a disability, or there’s no way you could get to work or education without it.

It’s important that you understand the ‘essential’ doesn’t mean convenient. If you live somewhere with no public transport, a car may be essential – but if you’ve got a bus-stop nearby (even if it’s some distance away) – a car may be deemed surplus to requirements. Even being able to book a taxi might negate the need for a car.

So, if you own your car and it’s worth more than £1,500 – there’s a good chance your receiver will ask for it to be sold. They may then allow you to buy a car for less than £1,000 – but again, only if it’s essential.

Should you happen to pay off HP car finance while a receiver is handling your case, ownership of the car will pass to them – and, based on the value; they’ll tell you what your next step should be.

Buying a car while in bankruptcy

Since you can now probably see how a receiver considers car ownership through the bankruptcy process – you’ll no doubt appreciate why getting car finance is going to be impossible. 

Of course, it’s not just receiver restrictions that will stop you getting car finance; since lenders understand the implications of bankruptcy, they will not offer any credit during while a receiver is handling your case.

In some instances, people who are bankrupt have sought finance – and, on rare occasions, been able to find someone who will offer credit. As well as the fact that it’s illegal to obtain credit of more than £500 without letting the lender know you’re bankrupt, breaking the restrictions your receiver has put in place may lead to court order suspending your discharge from bankruptcy – keeping your finances under the control of a receiver for even longer than the standard 12 months.

Finding car finance after bankruptcy

Doing without a car or car finance through bankruptcy can be hard – and it may be more difficult to get car finance when your case is discharged. 

Unfortunately, since record of your bankruptcy will stay on your credit file for 6 years, you may very well find you’re paying a higher interest rate than other people – and you may be asked to put down a large deposit to reduce the risk to the lender. 

The good news is, with a huge panel of specialist lenders, people who have previously been bankrupt still have a good chance of finding a competitive deal through Car.co.uk. If you think finding finance because of bankruptcy or poor credit is impossible – give our finance comparison tool a try – you might be pleasantly surprised. 

Other related FAQs

Looking for more related content to this? We’ve picked a selection of related topics that you may find helpful

In the short term, applying for a car loan can lower your credit score. However, over time if you make your repayments ontime, it can help you to build your score.

It may be possible to get car finance if you have an Individual Voluntary Arrangement (IVA) currently in place. To do so, you’ll need to seek the permission of the Insolvency Practitioner dealing with your case.

Both Equifax and Experian are credit referencing agencies. They use slightly different scales to present your credit rating – but both can provide lenders with some of the information they need to decide whether they’re willing to provide you with car finance.

There is no specific minimum credit score needed to finance a car. While your credit score is one factor – lenders will consider a number of different pieces of information; including affordability and the type of vehicle you’re buying.

If you apply for car finance shortly before applying for a mortgage, this can affect your mortgage price. However, if you have a mortgage in place already, it will have no impact.

In order to get car finance with a CCJ, you will need to change the status of your judgement on the record or have it removed.

If you make numerous applications for car finance, repeated credit checks can impact your score negatively. Your approach to paying back the loan will decide longer-term credit score effects – but if you pay on time, it could well go up.

If you’re refused car finance, find out why. You may need to correct inaccuracies in your credit report or take steps to improve your credit score. You might also want to consider using a guarantor.

Your access to agreements may be more limited, but it is possible to get car finance with a poor credit history.

It is possible to get car finance with a default, but it may be more difficult to do so than if you had a good to excellent credit score.