Financing your first car after a Chapter 7 bankruptcy can be a little intimidating. Don't worry. Bankruptcy is more common than you think, and so are post-bankruptcy auto loans. Here we'll provide you with some tips on how to get approved for auto financing after Chapter 7 bankruptcy.
Chapter 7 Post-Bankruptcy Auto Loans
A Ch. 7 bankruptcy will remain on your credit report for up to 10 years. However, that doesn't mean that you can't finance a car in all that time. There are lenders who will work with people in adverse credit situations.
They are known as subprime lenders. Subprime auto lenders will focus on your income, employment and residence situation and history, monthly expenses, and car loan history alongside your credit. If your credit track record is pretty clean outside of a bankruptcy that stemmed from uncontrollable or unforeseen events, these lenders are willing to take that into consideration.
After you have your Ch. 7 bankruptcy discharge papers, you can apply for auto financing. It's possible that local dealerships have already mailed you letters inviting you to visit them.
However, before taking any action, you should consider this: a post-bankruptcy auto loan will carry a higher-than-average interest rate. This is because your credit score takes a huge hit. Also, you will most likely need to make a down payment in order to get approved. So, before applying or even considering starting the process, it may be wise to think it through.
Tips on Getting Approved for Auto Financing after Chapter 7 Bankruptcy
Consider the following tips before rushing to get approved for auto financing after Chapter 7 bankruptcy.
- Use Time If You Have It
You can apply for financing the day of your discharge, but patience could save you money. The further the bankruptcy is in your past, the less of an effect it will have on your credit score. If you don't need a car right away, you can help yourself out by waiting. You can use this time to try to improve your credit score. Apply for a credit card, work to establish a strong payment history and remove any errors from your credit reports. You can qualify for a better rate if you improve your credit score before applying.
- Understand Your Vehicle Needs
Trying to get approved for financing after bankruptcy can be more complicated than it normally would be. It's best if you choose a reliable car that you can count on for years to come. Then, you can use the loan to build your credit while having access to the transportation you need. Also, it will be in your best interest to choose a car you can comfortably afford. You will want something that you can be confident you will easily be able to eafford.
- Map Out Your Car-Buying Plan
You can do research online to identify those cars in your price range that offer what you need in a vehicle. Then, you can use auto loan calculators online to tinker with the numbers. These tools can help you view some potential car payments. You can also play with the length of the loan term to see how it has an effect on your potential payment amount. Try to nail down a price range and loan term that suits you.
The Most Important Tip
Most importantly, remember that not every car dealership is going to be able to work with you. You need a special finance dealership who works with subprime lenders. If you are having trouble locating one of those, Drivers Lane is here to help.
We help borrowers with credit issues find car dealerships in their area that can work with past bankruptcies and more. Get the process started today by filling out our free and easy online application. We look forward to helping you!