Auto Loans after Bankruptcy

Getting an Auto Loan after Bankruptcy

If you are confused that you had filed the bankruptcy and now you need a Car Loan, a bankruptcy car loan‘ might be a good choice for you. As filing bankruptcy makes a huge mark on the credit report, and often it’s seen that a Car is required during the seven years after filing. I mentioned seven years because seven years is the time period in which bankruptcy usually remains on your Credit report and that can lead to the denial of CreditBankruptcy car loans can be helpful for you for buying a new car, even if you had bankruptcy in your past.

Getting an Auto Loan after Bankruptcy
Getting an Auto Loan after Bankruptcy

Bankruptcy Car Loans:

Bankruptcy Car loans can also help you in rebuilding and re-establishing your Credit rating after filing the bankruptcy.

Usually after two years of filing the bankruptcy one can become eligible for bankruptcy Car loans. This waiting period of two years gives the lender the ability to examine what your choices have been since the bankruptcy occurred. In simple words, it means if you keep on the same track like you did before bankruptcy, you will not receive the Loan. If you learned the lesson and show responsible behavior in your financial choices, then you can get the Loan for vehicle easily.

How to get approved for bankruptcy

Your Credit will suffer unavoidable damage after your bankruptcy is over. Contrary to claims made by disreputable credit recovery companies you cannot immediately delete this information from Credit reports. This means that there is no reset button.

G. Donald Golden, a bankruptcy lawyer, says that one of the greatest fears for someone who files bankruptcy is not being in a position to purchase a Car. Golden says that it is important to be proactive about your Credit. A combination of these activities can help you to repair the damage quicker and increase your chances of getting approved.

Build a Credit history

Each person’s Credit score is affected differently by filing bankruptcy. The greater the severity of the damage, the more accounts you have in bankruptcy. You can also expect to lose more points if your score is higher before you file. Someone with a score of 750 or more before bankruptcy could lose 100 points.

It is important to demonstrate to lenders that you have overcome financial difficulties. This can be done by making timely payments as soon as you can.

This can be a Catch-22 situation: You may need to get new Credit to improve your Credit score, but bad Credit won’t let you get approved. These are the top ways to overcome this problem:

      • Become an author user. Ask your loved one with good Credit to add you to their Credit cards as an authorized use. The account information will appear on both your Credit records as though it belonged to you both.
      • Secured Credit cards available __S.28__ You don’t have to have a high Credit score to qualify. Instead, you can make a deposit and be eligible.
      • Apply to a credit-builder loans. Although they are not as beneficial as long-term accounts or secured cards, they can help you improve your Credit score. Credit unions and community banks are the best places to look for credit-builder loans.

Opt for a cheap Car

Poor Credit can make it difficult to get large loans. Another way to increase your chances of approval is to shop for a less expensive car.

It could be that you settle for a used car. However, if you need transportation to get to work, it could make a big difference.

However, you don’t have to compromise on quality just because it is cheaper. You may find a cheaper model than the top-rated compact cars, or you might be able to get a second hand one.

You can save money and not fall back into financial instability by going cheaper. This solution does not have to be permanent. You can always consider increasing your income or Credit.

Locate a cosigner

Lenders may decline Auto Loan applications if your Credit score is not in good standing. A cosigner can help reduce the risk for lenders and improve your chances of approval.

Cosigner: A person who agrees with you to assume full responsibility for your Loan repayment. The lender may attempt to collect from your cosigner if you fail to pay your Loan payments.

You don’t have to have great Credit to be a cosigner, but having someone with better Credit can increase your chances of getting approved for an Auto Loan.

Give it some time

No matter what steps you take there will be a waiting period before your Loan application can be approved. Lenders may require you to show a copy your bankruptcy discharge order. It takes approximately 60 days for the order to be received after your court proceedings.

Golden suggests that you will likely need to take longer to improve your scores even if this is the case. He says, “The more time you wait the better.” “If it’s possible, I would love to see people wait at most a year.”

You can save money while you wait and build your Credit.

Things to be aware of after bankruptcy

Golden warns Car buyers that a subprime Loan is possible for their first Car Loan after bankruptcy. If you are in a rush to get Auto financing for bad Credit, you could be vulnerable to scams, poor terms and the risk of falling back into debt that you cannot repay.

You might be surprised at the following:

High interest rates

LendingTree reports that the average interest rates on a car loan are around 5.3% for someone who has excellent Credit. However, Experian reports rate increases of nearly 21% for people with subprime Credit.

If your monthly payments are small, high interest may not be an issue. However, calculating your total loan repayment cost can be quite eye-opening. This simple calculation is based on a 4-year Loan repayment.

A $10k Loan at a 5% rate = $1,054 to pay for interest

A $10k Loan at an 18% rate = $4,100 to pay for interest

Repayment terms are long

There are pros and cons to repaying a Loan over a prolonged period of time. Lenders may offer you longer repayment terms if you have had Credit problems. This can help you keep within your budget.

A low payment may distract you from the true cost of borrowing. Lower payments can mean longer repayment terms and higher interest rates. Here is an example of a calculation that assumes a $10,000 Loan with 10% interest.

3 Year Repayment = $323 Monthly Payment and $1,616 Total Interest Payment

5 Year Repayment = $212 Monthly Payment and $2,748 Total Interest Payment

Predatory lenders

Your score may not be above 600. You might not be eligible for subprime loans, “no Credit check”, ” buy/here, pay-here” financing. These loans are targeted at those with low Credit scores and are notorious for being predatory. These companies may lend you more money than your Car is worth, and they might charge you high interest rates. This could leave you in debt.

How to get Auto loans after bankruptcy

Although businesses that offer financing without a Credit check may seem like the best way to get a Loan, the potential risk to your bank account is too high.

Before shopping for an Auto Loan, think about other options. Look for financing through a bank, Credit union, or online lender.

Credit unions, in particular, tend to offer products that help people to rehabilitate and manage their finances. They may also be more flexible when it comes to dealing with post-bankruptcy issues. Golden warns that there is an exception to the rule. Credit unions may not be able to do business with people whose bankruptcy discharge includes owing them debts.

You will need to search around for a lender that will help you with your Credit problems . Ask the lender how to improve your chances of getting approved next time your Loan application is denied.

The bottom line

Your bankruptcy will lessen in impact over time. Your bankruptcy filings will disappear approximately 10 years after the filing of Chapter 7. A bankruptcy won’t permanently damage your Credit score or your finances.

If you do the right things, you can make a fresh start. You should address any financial problems that may lead to you missing future Loan payments.

This means that you must be able to afford the total cost of owning a vehicle.