If you recently had your bankruptcy discharged and are looking for a car loan, can you go to a buy here pay here (BHPH) dealership? You certainly can, however, you need to be aware of the pros and cons that come with a BHPH auto loan, and what happens to your credit score after a bankruptcy.
Your Credit after Bankruptcy
Before we get into the specifics of buying a vehicle after bankruptcy, you should know how a discharged bankruptcy affects your credit score and reports. A bankruptcy can stay on your credit reports for up to 10 years from the date you filed. How much a bankruptcy drops your credit score depends on your particular situation at the time, but its impact on your credit lessens over time.
You’re allowed to finance a new car immediately following a discharge, but a direct lender (like a bank or credit union) more than likely isn't going to approve you due to your lower credit score and freshly discharged bankruptcy. This is where a BHPH dealer may come in handy.
Pros and Cons of a BHPH Dealer
Buy here pay here dealerships offer loans on their vehicles in-house, meaning they don't use outside lenders. This can make financing a car easier and faster – you can often sign the loan documents and drive away in a vehicle the same day. This is one advantage to financing a post-bankruptcy auto loan through a BHPH dealership.
Another – and possibly the most important – advantage is the fact that most of these dealers don’t look at your credit. This means the dealership isn’t going to be concerned about your discharged bankruptcy. Instead, they base approvals on your income.
Buy here pay here dealers come with some drawbacks as well. One of the biggest is that since most BHPH dealerships don’t check your credit, they also may not report your timely payments to the credit bureaus. This would mean you can’t improve your credit score. So, you're going to want to ask about their reporting practices ahead of time, especially if you want to repair your credit after a bankruptcy.
Another con is the interest rate. Because these dealers aren't using your credit to determine eligibility, your interest rate is automatically going to be higher than average – which increases the overall cost of a loan.
Finally, your car choice is limited to what's on the dealership lot. BHPH dealers only sell used vehicles, and the types of models you might find can vary greatly. Some BHPH dealerships stock newer used models with lower miles, while others sell older, higher mileage cars.
Find a Bankruptcy Car Dealership
Buy here pay here dealers can be great for getting a post-bankruptcy auto loan since they don't check your credit. Just make sure you're aware of some of the drawbacks that come with the ease of approval.
If you need assistance finding a local BHPH dealership, we can help you with that. At The Car Connection, we work with a nationwide network of special finance dealers, including those that offer post-bankruptcy car loans.
Don't hesitate to use our help! Fill out our free, no-obligation auto loan request form to get the process started right now.