Buying a car after bankruptcy? These suggestions could help
One of the effects of bankruptcy for you might have been losing your car. Now, considering you need to travel everyday, you must be wondering whether you can get a car loan to buy another car after bankruptcy.
Well, the simple answer is yes. But there are quite a few things to consider before you do.
Getting a discharge is the first one. A discharge wipes your credit-slate clean – which must be in quite a poor condition because of all the financial trouble that forced you into bankruptcy in the first place. Getting a discharge will actually make you more attractive to potential creditors now than before your bankruptcy as it means you don’t have any loans to pay off and can’t file for a bankruptcy discharge again anytime soon.
However, your credit score is still in a terrible condition, and you need to start repairing it.
Get some credit. A credit card with a low limit would be best. You might, in fact, get some offers for credit cards now that you are more attractive thanks to the effects of bankruptcy. Even then, the interest rate charged to you will still be pretty high. See if you can get an unsecured credit card. If you can’t, try for a collateralized one in which you get credit against a deposit. Whatever you get, make sure the bank will report your account to one of the major credit agencies. Use the card and make timely payments. It will help your credit score.
Keep track of your credit score and after some time see if you can get another unsecured credit card or a small unsecured loan. Remember to pay everything off on time.
Next, select a car to buy. Try to settle for a car that is not so popular but works well mechanically. A used car that runs well enough without any major maintenance would be best. The aim is to fulfill necessities while keeping the cost down.
After narrowing down your choices, shop around for the car loan. Look for a reliable lender who would be willing to work with a previously bankrupt individual. Check with the Better Business Bureau for complaints against a lender. Most lenders have some requirements such as no repossessions within the last year and some income requirement. Even if you meet them, you’ll still be hit with a high interest rate, but watch out for prepayment penalties and abusive fees.
Your chances of finding a good deal will be substantially higher after a year or two has passed from your discharge. If you can wait that long, save up for a better down payment.
Negotiate with the lender and try to explain to them the reasons for your bankruptcy. Maybe offering some extra collateral or bringing on a co-signor will help in getting a better deal. But remember, if you default on your loan, your co-signor will have to bear its burden.
Get a pre-approved loan. It will help in negotiating with the car dealership that you now approach to buy the car. Try to get the price of the car as low as you can.
Remember to pay the installments of the loan on time as it helps your credit score. Try to refinance it after six to twelve months. Your improved credit score should help get better rates. Just make sure that you are saving more money from the refinancing than any fees you have to pay for it.