Chapter 7 or Chapter 13- Every bankruptcy is a very challenging situation. It causes embarrassment and financial troubles but it doesn’t mean that you cannot buy a car. Many people think that they will never get auto loans as bankruptcy ruins credit scores. Thankfully, this is not true. Post bankruptcy auto loans are a boon for borrowers who have just come out of bankruptcy.
A bankruptcy stays on your credit report for ten years and so, it has such a huge impact on car loan approval chances. It is for this reason that you must work strategically in order to get a car loan. The key is to reduce the lender’s risk. If you are successful in lowering the lender’s risk, he will easily offer you an after bankruptcy auto loan.
How to Get Car Loans after Bankruptcy?
Patience is the Key
You filed for bankruptcy because you were unable to pay-off your debts. You certainly don’t want to get a car loan with unbearable monthly payments. So, you must have patience in getting an after bankruptcy car loan.
There are many lenders who offer auto loans to people in bankruptcy. But, they often charge high interest rates. So, it is best to opt for car loans after coming out of bankruptcy. Once you have discharged bankruptcy, you get the opportunity of availing car financing at reasonable rates. You can lower your rates by waiting for two to three months. During this time, you must concentrate on increasing your credit score.
Employment and Income is Important
When the lender is ready to overlook your bankruptcy and bad credit score, he is taking a risk. If he considers your car loan application very risky, he will not offer lower interest rates. But, there is a way of reducing his risk.
If you have a stable job and regular source of income, the lender will be assured of regular monthly payments. This will help you secure a post bankruptcy auto loan without much difficulty.
Lenders also consider your income as an important factor for approving your post bankruptcy auto loans. If you are able to pay your expenses and still save, you will be able to make easy monthly car loan payments. So, lenders ask for sufficient income and a decent debt to income ratio.
Search for Lenders That Offer Car Loans After Bankruptcy
Traditional lenders and banks shy away from borrowers with post bankruptcy because they are considered a huge risk. There is no point in applying with those lenders who are going to reject your car loan application.
So, research and then choose your lenders. Apply with those lenders who are experienced in offering after bankruptcy auto loans. You can even go for online auto lenders. There are many online auto financing companies that offer affordable auto loans. They even offer auto loans after bankruptcy because they have a wide network of lenders and dealers.
When you have a just come out of bankruptcy, you mustn’t buy a new car. A new automobile is costly and will increase your car loan amount. Instead, choose a reliable used car. Don’t forget to get it checked by your local mechanic.
Put Money Down
When you make a substantial down payment, you reduce the car loan amount and the lender’s risk. This prompts the lender to offer you lower interest rates and instant approval. So, start saving money for down payment. Usually, 10% -20% of the total cost of the car is enough. But, there is no harm in going for a higher amount.
Co-Signer Can Help You
Getting someone with a good credit score to co-sign your car loan contract reduces the lender’s risk to a considerable extent. Find someone who is ready to co-sign your after bankruptcy auto loan. A co-signer can be anyone from your parents, friends, or relatives.
All these points will definitely improve your chances of getting approval on auto loans after bankruptcy. These points will help in reducing the lender’s risk which means you will get reasonable interest rates.
A post bankruptcy car loan is a perfect way of buying a car. It will also assist you in building your credit score after bankruptcy. So, it is important that you take a well-thought decision.