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Getting a car loan after bankruptcy Advertiser Disclosure Advertiser Disclosure We are an independent, advertising-supported comparison service. Our aim is to assist you make better financial choices by offering you interactive tools and financial calculators that provide objective and original content, by enabling users to conduct research and compare data for free to help you make informed financial decisions. Bankrate has partnerships with issuers such as, but not restricted to, American Express, Bank of America, Capital One, Chase, Citi and Discover. How We Make money The products that appear on this site come from companies who pay us. This compensation could affect how and when products are featured on this site, including such things as the order in which they may be listed within the categories of listing in the event that they are not permitted by law. Our mortgage or home equity products, as well as other home lending products. However, this compensation will affect the information we publish, or the reviews you read on this site. We do not cover the entire universe of businesses or financial offerings that could be open to you.
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3 min read . Published April 06 2022
Written by Rebecca Betterton Written by Auto Loans Reporter
Rebecca Betterton is the auto loans reporter for Bankrate. She is a specialist in helping readers to navigate the ins and outs of securely taking out loans to purchase an automobile.
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Making an application for an auto loan after bankruptcy might be a daunting task. It’s true that receiving a competitive loan after bankruptcy can take some extra leg work however, it’s possible. The work will consist of assessing and improving your credit score while taking into consideration the extra hoops you may have to jump through. The types of bankruptcy available There are two major types of bankruptcy. Before you can proceed with the process of obtaining a new loan, it is important to understand the specifics of the type of bankruptcy you have filed. Chapter 7 bankruptcy The court will take legal title to some of your belongings when you make a filing to file Chapter 7 bankruptcy, and thus a temporary stay will be placed on your existing debts. The process generally takes between 80 to 130 days to complete , and may remain visible on credit reports for as long as 10 years. Chapter 13 bankruptcy Filing for chapter 13 bankruptcy — also known as a wage earner’s scheme — allows filers to develop a plan to pay off accrued debts. Following court approval the plan generally consists of paying fixed amounts over a period. It can remain on your credit report for only up to seven years. How do you obtain a car loan after bankruptcy Before signing off on a car loan application, there’s some cleaning up that needs to be completed to show the lender that you are able to repay your loan. You must take a few additional steps in order to receive approval and favorable conditions. Step 1. Check your credit After you filed your bankruptcy, your credit score has been expected to shift. Although there isn’t a set amount of drop in your credit score following a bankruptcy, it does have less significance as time passes, so you’ll likely get higher scores in the last year than you will in the first. The higher your credit score and the better the terms you’ll get. The score of your credit can be found by contacting credit bureaus — the main three being Experian, TransUnion and Equifax. It is recommended to determine where your credit stands before submitting a new loan application. This way you can be more confident you are getting the most competitive rate. Enhance your credit score
Because your credit is impacted after bankruptcy it is in your best interest to be ahead of your purchasing.
Step 3. Plan for a car down payment Making a down payment will greatly increase your odds of approval and may also save you money by lowering your interest rate. Utilize a calculator to determine the amount you can save by combining different amounts. Step four. Shop around The key to getting the best deal comes down to comparing many different lenders and staying open to more than the most recent car models. Take a look at the pros and cons of a and take a look at a number of offers before deciding. Apply for loan preapproval
Before you go to a dealer, it is a good idea to apply for . This does not guarantee loan approval however it can give you the ability to negotiate and a firm understanding about your spending plan.
What to remember following bankruptcy? Although a car that is financed can be obtained after declaring bankruptcy, there still are some important things to be aware of. Beware of predatory lenders If you are you are a possible loan owner with less than stellar credit, you will likely encounter lenders that are predatory. This kind of lender will likely boast guarantees on financing and no credit check. These options can many times cause you to be liable to their high-interest rates. Understand the advantages and drawbacks for longer loan terms. Likewise you could be confronted with . These extended loans are a potential risk particularly at 7 or more years. A longer loan time frame is another situation where you’re more likely to end up upside down on a loan. Think about a co-signer if your credit score is low, think about applying for a loan that requires the . You will be more likely to be approved since lenders will have more security from the co-signer’s score. Next actions Lenders tend to allow loans of drivers who are confident in their ability to pay. However, a bankruptcy history does not bar you from satisfying the standard. Be patient and deliberate in the process. Take time to build your credit before applying for a loan .
Authored by Auto Loans Reporter
Rebecca Betterton is the auto loans reporter for Bankrate. She has a specialization in helping readers to navigate the ways and pitfalls of borrowing money to purchase the car they want.
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