Can you get a bankruptcy car loan?
While you will pay a much higher interest rate, there are certainly many subprime lenders willing to work with you. However, should you get financing right after filing bankruptcy? There is a raging debate about the topic. There are two ways to look at it. On the one hand, you will pay a higher interest rate. That’s a given. On the other hand, the faster you get a new loan, the quicker you start rebuilding your credit. You have to do this at some point, so why not begin instantly.
Can you get a traditional loan?
You will probably not qualify for financing from standard lenders. This means that applying at your bank or dealership is most likely futile. If you have just filed for bankruptcy, then subprime lenders will probably be your best bet.
What qualifications do you need to meet?
They are really the same as any other loan you would apply for. You have to be at least eighteen, have a steady source of income, and prove you do not have much debt. If your credit is exceptionally bad, you might be asked to provide proof of your income. Many people think that subprime lenders will work with anyone. However, you still need to meet their minimum qualifications.
Is their collateral?
Yes, the vehicle itself is collateral. So how do you assure yourself of being approved? There are a number of strategies that work. Here are five of the best:
#1) Explain why you filed for bankruptcy
In most instances, this will not have much of an impact. However, if you had a good reason for filing, it might give you a better chance of being accepted.
#2) Put as much money down as you can
This shows the lender you are serious about paying the loan off. If you do not put a dime down, you have less of a chance of being accepted. Remember, companies are not going to lend you a ton of money immediately after filling bankruptcy. Therefore, the more you can help yourself by spending money from your own pocket, the better. Moreover, not only does it improve your odds of getting the bad credit auto loan, but also it will reduce the amount you owe per month. If you are buying a $6000 car and you put $3000 down up front, your monthly payments will be cut in half.
#3) Get a co-signer
Make sure the other person signing has good credit and a high amount of savings. This will dramatically improve your odds of being approved. However, try not to use a co-signer if possible. Apply first without one. Only use one if you are rejected. The reason is, you are basically giving them half of the credit rewards of getting the financing. Since a huge reason for getting the loan is to rebuild your credit, this is important.
#4) Offer more collateral
It is true that the car itself is the main collateral. However, to ensure you get approved, you might offer additional possessions. Only do this if the vehicle itself is not enough.
#5) Shop around
Never accept the first quote you are given. While your options are certainly more limited than if you were to have good credit, there are still plenty of companies willing to work with you. You are doing yourself a huge favor by getting a range of quotes and seeing which is best.
To sum up, you can get a bankruptcy car loan. It is just a little harder than if you had good credit. Nevertheless, if you follow these four tips, you will find the best rate around.