Car Loan After Bankruptcy

There is a lot of confusion about whether or not a person who has recently gone through a bankruptcy can be eligible for a car loan. A car loan after bankruptcy is within your reach as long you have a firm grasp on the various routes you can take to ensure that you eventually get approved for you car loan.

First off, you must understand that your credit is most likely in pretty bad shape immediately after your bankruptcy. The reasons for this are really two-fold. For one, you probably stopped paying all of your credit accounts during the bankruptcy process, and this means that all of those accounts that went unpaid ended up in default on some level. Even though you probably had most of the balances on these accounts discharged during your bankruptcy, the fact that they went unpaid and ended up in default probably means that your credit is currently poor or very poor. The actual bankruptcy itself also plays a significant part in damaging your credit, and the bankruptcy as a negative mark will be on your credit report for at least seven years.

So because of your bad credit score and credit history, most lenders will have a difficult time approving you for the conventional kinds of loans people are interested in getting. These include your standard mortgage loan, personal loans, and of course car loans. There are several ways you can go about obtaining a car loan after bankruptcy, and the first way it to simply try and improve you credit and apply later on.

Most lenders will not even look at an application coming off of a bankruptcy for at least two years. After this time has elapsed, they will consider your application, but if you haven’t done anything to improve your credit then you will more than likely get denied immediately. This means that you need to start building up your credit right after your bankruptcy proceeding is finished. So you might be wondering how this is even possible when you can’t get approved for any loan.

You can get approved for credit and loans immediately after bankruptcy, the problem is they’re not the kind of conventional loans a qualified borrower would be eligible for. The loans I’m talking about here are what are called “bad-credit” or “sub-prime” loans. These kinds of loans have extremely high interest rates and fees, and are often times made by less than credible lenders. Car loans do not typically fall into this category, and there are other options if you want to rebuild your credit.

A better option would be to obtain a secured credit card immediately after your bankruptcy so that you can start rebuilding your credit as soon as possible. A secure credit card actually requires collateral, and most of the time you can easily be granted a credit line up to the amount of money you have to put down as collateral. By using these kinds of cards, you can immediately begin building your credit again, and have the availability of a small credit line.

After the two years is up, and you have made all the payments on your secured card, and whatever other accounts you have open, you can then attempt to apply for a car loan at most conventional places that supply car loans. Make sure the rest of your application is up to par, and be aware that just because it has been two years since your bankruptcy, most lenders will still have some hesitancy about approving you.

If this route seems a little bit too drawn out for you to get an auto loan after bankruptcy, there are other ways to go. If you have a large down payment available, or have a really great income, you can still try to apply for a standard car loan and there still may be a chance a lender will be willing to work with you. The better the rest of your application is overall, the better chance you’ll have at getting approved.

Another quick route is to try to apply at the dealership you’re buying you car at. Most dealerships offer some kind of financing, and depending on the rest of your application, you may be able to secure financing without a problem via the dealership’s financing. Some dealerships don’t mind approving applicants with bad credit, but you must have a good employment history and a current income in order to even be considered when you have bad credit. If you are coming off a bankruptcy, you still will most likely have to pay a high interest rate and fees even if you are approved.

In the end just stay persistent and know that there a multitude of options available even after you’ve gone through a bankruptcy, and that a car loan is still within your reach as long as you follow the correct steps.