Car Loans With Bankruptcy

If you’ve recently gone through the bankruptcy process and you’re interested in securing a car loan after bankruptcy then you’ve come to the right place. If you’re like most people who file, then you probably filed under Chapter 7, in which case you will need to begin rebuilding your credit before applying for financing after bankruptcy. If you’ve filed under Chapter 13 then you will also need to establish your credit while adhering closely to the terms of your repayment schedule. You may have heard that car loans with bankruptcy are impossible, though this isn’t exactly true. In fact, there are a number of strategies that can be used to obtain a car, and the following article will tell you how it can be done.

Although the personal bankruptcy process can be an effective strategy to eliminate large portions of debt, it can also bring with it a hose of undesirable consequences. Perhaps the most important consequence is the fact that a bankruptcy claim can do serious damage to your credit rating, making it virtually impossible to secure financing while the claim remains active on your record. To be clear, your record will remain tarnished for up to 10-years after filing. Of course, this isn’t to say that you should simply give up on obtaining financing; rather, you should consider some of the following steps to increase your chances of obtaining a car loan with bankruptcy –

It Is Possible To Repair Your Credit After Bankruptcy!

Although bankruptcy will take a toll on your credit rating, there is nothing stopping you from repairing your credit and even completely restoring it. The important thing to keep in mind is that any effort to reestablish you credit should be done only after your bankruptcy has been discharged. It’s also critical that you don’t miss any payments while trying to restore your credit, since missed and/or late payments can result in negative feedback from your creditors, and this is the last thing you want while trying to rebuild. Even if you have to set up automatic payments through your bank account, the point is to not miss any payments.
Now that we’ve gotten that out of the way, we’re ready to take you through a series of simple steps that can help you rebuild your credit and get you the car loan you deserve. Carefully consider the following steps when attempting to secure a car loan with bankruptcy –

Get Your Finances In Order

You need to ask yourself how you got into this mess in the first place. Did you file a bankruptcy claim because of poor financial decision making? Perhaps you filed a medical bankruptcy claim due to out-of-control medical expenses. Whatever actions of behaviors led you to file your initial claim, it’s imperative that you avoid them going forward.

Start Saving

After emerging from bankruptcy it’s a good idea to get into positive financial practices. Consider setting aside 10% from every paycheck and placing this money in a savings account. This money can later be used as down payment for your vehicle purchase. The money can also be used to fund a secured credit card, which will be necessary in order to get your credit back to where it needs to be to qualify for financing. Hoarding cash in a basic savings account can also allow you to build up an emergency fund so that you don’t have to miss any car payments once your loan has gone through.

Keep Detailed Records

Because of your bankruptcy, creditors will want proof that your life and finances are back on track before they will be willing to lend. To this end it’s important to save pay stubs, bank statements and bills to prove that you are back on track in terms of your expenses. You will also want to keep your bankruptcy discharge papers handy.

Obtain a Secured Credit Card

A secured credit card is a credit card that is backed by a cash deposit. For instance, you put down $500 cash for a $500 credit limit on a secured card. Want a $1,000 credit limit? Simply put down a $1,000 cash deposit – you get the idea. These credit cards are important for reestablishing credit because the cash deposits you make toward these types of cards show as available credit on your credit report. The fact that you have available credit will encourage other lenders to extend credit, and so the cycle goes. Of course, just because you now have a credit card doesn’t mean that you should go crazy with purchases. In fact, the best thing you can do is to use the card once for a small purchase ($50 to $100) and then stop using it. You can even cut it up if you want to. Remember that the whole point is to establish credit, and these cards allow you to do exactly that.

Buy Your Car

Even after taking steps to repair your credit, you should expect to receive a high interest rate on a car loan after bankruptcy. That being said, if you are diligent with your payments while continuing to take steps to improve your credit, your interest rate will eventually go down. Also, before you get all excited about purchasing that brand new Mercedes convertible you’ve been eyeing, you should know that most lending institutions will only lend between $10-15k maximum, which will allow you to purchase a “basic” car for transportation.

Car loans with bankruptcy are possible if you’re willing to put forth the effort to repair your credit. For more information on claiming bankruptcy and for a step-by-step guide on how to claim bankruptcy, please feel free to browse through our comprehensive site. We even offer a free bankruptcy evaluation to help you determine if filing bankruptcy is the right choice for you.

Please click on the following link to learn about discharged bankrupt loans.