Obtaining an auto loan after bankruptcy might appear unattainable. In addition, bankruptcy can remain on credit reports for seven to ten years after filing. The best part is that some lenders are ready to engage with individuals who have bankruptcy on the credit reports, albeit at a premium interest rate. Improving your credit score and budgeting for a down payment will also boost the chances of being approved for an auto loan.
Check Your Credit
Reviewing your credit reports is an excellent approach to getting an overall picture of your current financial situation. You can receive a free copy of your credit report from any central consumer credit reporting agency.
Checking your credit report should be something you do at least yearly, especially before making a significant purchase such as a car. Verify that the information on the reports is correct, and contest anything that you find inaccurate. Even while there is no one standard credit score that must be met to be approved for an auto loan, if the credit scores are poor, you may have problems getting authorized by specific lenders.
Rebuild Your Credit
After reviewing your credit score, if you are in a position to delay the purchase of a car, you should think about taking the time to repair your credit first. As a result, there is a better chance that you will be authorized for an auto loan at a reduced interest rate.
You can start to rebuild your credit by getting a secured credit card, getting a credit-builder loan, or being an active user on the credit card of your friends or family members.
Budget for a Down Payment
According to professionals, transportation costs should not exceed 10 percent of your budget. Calculators for auto loans can help you determine the type of car you can afford and your future monthly payments. Additionally, budgeting for a down payment can ensure you receive more favorable terms. Experts suggest putting down at least 10 percent to obtain the best interest rates and keep your auto loan from getting underwater.
Shop Around
When you’re ready to purchase, look around for the most outstanding auto loan deal. Evaluate various lenders’ interest rates or loan terms to identify the most suitable deal for your finances. Preapproval for an auto loan can also give you an idea of the loan conditions you may be eligible for.
Preapproval is a preliminary offer containing an expected loan amount, rate of return, and loan duration. However, keep in mind that preapproval does not guarantee that you will receive the loan; you must file a written application to determine if you are authorized but on what terms. If you still cannot obtain a car loan, you may also want to try obtaining a co-signer with excellent credit to boost your chances of getting approved for a loan or possibly obtaining a better lending rate.
It is possible to obtain a car loan following bankruptcy. One in five Americans has filed for bankruptcy in the previous five years, which doesn’t mean they’re done with their lives just because they’ve filed for bankruptcy. There are numerous options for getting a new car loan after bankruptcy.
