People may assume it isn’t possible to get any type of credit, much less a car loan after bankruptcy. This is not true, though those with imperfect credit may need to prepare a little longer prior to applying for a loan. However, some people start receiving credit offers immediately after their bankruptcy is filed, though these may not always be for use with a car loan.
Many credit repair experts suggest waiting six to twelve months prior to attempting to obtain a car loan after bankruptcy. Some recommend accepting an early offer of credit from a credit card company, even if it has fees, is a secured card, or has a low limit, and they advocate using that card to begin building an improved credit history. Having a credit card established after the bankruptcy, and paying it off every month does assert that the person is reforming their previous ways and being responsible about credit, which improves credit score.
Another thing most people will need is a job that has existed for at least six months. Proving a means to pay for car loans is valuable and will assist in finding one. Having a downpayment for a car of about 20-30% of its value is another good mark and may increase financing options.
Additional advice from credit experts suggest that people know their credit score and read their credit report. Occasionally after a bankruptcy occurs, an account will stay open or amounts paid through bankruptcy proceedings aren’t credited. Make sure to clear any parts of the history that should have been taken care of by the bankruptcy, and close any accounts that are still showing as open. This can take a couple of months but has a good chance of improving loan offers.
Once a credit report is clean and people have shown good history on making new payments, it’s time to start shopping for a loan. There are credit companies that specialize in bad loans, and some people will probably find this as their only option. Some of these companies operate online and a few online sites allow check credit and then send a number of different offers for the customer’s review. Knowing approximate amount of loan desired helps, because this will make offers more specific and can aid people in determining if interest amounts keep the loan payments within an affordable range.
It’s quite likely that people will pay subprime rates for a car loan after bankruptcy, but the amount of interest can vary by offer, and comparing is a good way to get the best rate. Best rates aren’t always had at car dealers, though some dealers specialize in bad credit loans. It’s still a better idea to make sure to look at multiple offers prior to deciding on a loan.
With a good income, it is possible to get a car loan after bankruptcy, right after it occurs, instead of waiting. This may mean paying higher interest, but people can consider refinancing the loan in six months to a year if they’ve improved credit score and have an excellent payment record. This is one method for beginning to build and improve credit, but it may come at a slightly higher cost at the onset of the loan.
One thing that should be avoided is obtaining loan if there is a good chance payments can’t be met. Creating a negative credit report right after bankruptcy lowers score and will make financing difficult under most circumstances. People should be sure that they are able to meet their financial obligations prior to taking out a car loan after bankruptcy.
