Borrowing money after bankruptcy won’t be an option for everyone, but for those who are eligible, it can dramatically change how they see life. Keep in mind that bankruptcy remains on your credit report for seven to ten years. Getting a new car after bankruptcy may seem out of reach at first glance, but when you look closer at the facts, you’ll find that there are many options available to get you back behind the wheel.
Read more to see how you can get an auto loan after bankruptcy.
Get a Copy of Your Credit Reports
It can be painful to think about how your credit report will look after bankruptcy, but it’s important to know what lenders see when they review yours. Reviewing your credit report can also give you a chance to check if you’ve made any mistakes after the bankruptcy. You can only correct your mistakes if you know you’ve made them.
Although the credit score you see on your statement may somewhat differ from what a lender sees, it will give you an idea of where you stand.
The lender pays close attention to what your credit report says about any previous loans. Even if you’ve declared bankruptcy, paying your other debts back on time will be in your best interest.
Save for A Down Payment
The benefit of bankruptcy is that it can result in improved cash flow, which may allow you to save money for a down payment. The more money you can put down as a deposit, the less risk the lender faces; thus, they are more likely to approve your loan application.
Include a Trade-In
Consider trading in your current car for the new one. This will not only lower your monthly payments but will also lower the amount you need to finance.
Get a Pre-Approval
You should consider getting a car loan pre-approval. This can help lower the potential impact that numerous inquiries can have on your credit score. Gather copies of your pay stubs, credit report, and other financial documents, and try to get pre-approval before visiting a dealership.
Avoid Bad Loans
Before you sign any car financing contracts, you should be extremely cautious, as you might end up with a predatory loan. Some dealerships offer buyers buy-here, pay-here loans. These might seem great, but they tend to charge very high interest rates.
Remember that any interest rate applied is on a per-month basis and not per year. Check your contract to ensure that you can easily afford to make the payments on time and that there are no hidden costs. Also, beware of lenders who guarantee loans or who claim that they don’t perform credit checks.
