How to get a car loan after bankruptcy

Filing for bankruptcy may have been one of the best things and worst things that you have done in years. Bankruptcy can bring immediate relief to an unbearably stressful financial situation, and this may have been a situation that you had no other reasonable option to get out of. On the other hand, after filing for bankruptcy, you are faced with the monumental task of trying to rebuild your financial life and your credit rating. In many bankruptcies, you may keep one of your vehicles. However, a bankruptcy may continue to be reported on your credit report for seven years, and during this time, there is a solid chance that you may need or want to replace that older car for a newer one in better condition. After all, a newer car may be more reliable and have fewer repair issues. The challenge arises when you attempt to apply for a car loan after filing for bankruptcy. If you are in this situation right now, walk through these steps to potentially find success with your auto financing efforts.

Focus on Your Credit Rating

Immediately after you file for bankruptcy and for many months afterward, your credit rating will likely be abysmal. However, your credit rating will slowly improve as you make regular payments and the bankruptcy ages. Remember that credit reports place more emphasis on most recent credit history items. If it has been a few years since you filed for bankruptcy and if the bankruptcy has been successfully discharged, your on-time payments recently may have boosted your credit scores to a reasonable or even a good level. Some lenders may still be opposed to extending a loan to you if your bankruptcy is less than seven years old, but others may be agreeable to entertaining the option if you have re-established decent or good credit recently.

Use an Auto Loan Calculator

Once you have a reasonable or good credit score, you can begin seriously searching for a new car. To begin the process, you need to know your price range. Review your budget so that you know what monthly payment you can reasonably afford to make. Remember that your ability to make timely payments will help you to rebuild your credit in the years to come. Avoid taking on a loan payment that will stress out your budget. A loan calculator can tell you what loan balance is associated with an affordable payment.

Save for a Down Payment

Many lenders who may consider offering you an auto loan after a bankruptcy understandably will not extend a 100 percent loan-to-value offer to you. They will typically want you to make a sizable down payment. The larger the down payment that you can afford to make, the easier it may be for you to find a lender who will work with you. Try to save at least 20 to 30 percent of the sales price as a down payment, but remember that some lenders may require an even larger down payment.

Reach Out to a Local Bank or Credit Union

When you think about applying for a new auto loan, you may initially think about contacting major financial institutions. These are big-name banks that most people are familiar with. In most cases, these huge financial institutions have very strict lending requirements with minimal or no flexibility to deviate from them. On the other hand, a local bank or a credit union may have more flexibility to consider your auto loan request. Remember that having a sizable down payment and showing that you have been able to manage your finances well over the last few years since the bankruptcy was filed are wonderful factors that may work in your favor.

Compare All Options Carefully

You may be eager to jump on the first auto loan offer that you can find. This can be a mistake. After all, the loan term, down payment requirement, loan fees and interest rate can vary, and some loan programs are more affordable than others. For example, if you refinance your car and use a program for online title loans, your financing typically have a term that is only a few weeks long. Spend time exploring all options and comparing them thoroughly so that you make a smart financial decision.

Finding an auto loan after filing for bankruptcy can be challenging, but it is not an impossible feat. Having the right strategy in mind and being tenacious in your efforts are helpful. Put these tips into action to begin the process.