Consider Refinancing Your Car Loan
Filing for bankruptcy doesnt mean you have to settle for an astronomical interest rate for the duration of the auto loan. By managing the loan and staying current on other debt obligations, your credit score will start to climb. At this point, it may be wise to look into refinancing the auto loan for a lower interest rate.
Chapter 13 Vs Chapter 7 Bankruptcy
For many lenders, credit history and credit score are the greatest indicators of one’s financial responsibility. However, they’re not the only considerations. Lenders also consider the number of accounts included in your bankruptcy. The more accounts, the greater the bankruptcy’s impact on your credit.
Individuals can file for two kinds of bankruptcy: Chapter 7 or Chapter 13. According to , your ability to get approved for a car loan is often impacted by the type of bankruptcy you filed for and the amount of time since you filed for bankruptcy.
Filing for bankruptcy usually takes several months after your initial meeting with your lawyer. With a Chapter 13 bankruptcy, your creditors reduce the amount of money you owe. You are then responsible for making a payment to the trustee who’s in charge of your case, and they, in turn, portion out payments to the various creditors.
According to Auto Credit Express, the biggest advantage of this type of bankruptcy is that you get to retain your assets and property. This type of bankruptcy usually takes five years to complete. While a Chapter 13 stays on your credit for up to seven years, you do have options if you are trying to take out an auto loan during that time.
What Is My Life Like After Bankruptcy
Once your Chapter 7 bankruptcy gets discharged, following these tips can help you eventually buy a car after bankruptcy. Clear your existing car loan.
How to Get a Car Loan After Bankruptcy your reaffirmation agreement within 60 days of filing for the court, or before discharge whichever comes later!
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Considerations When Getting A Car Loan After Bankruptcy
The effect of bankruptcy on your credit will be determined by how good or bad the credit was before filing for bankruptcy and how well did you maintain your credit after your filing. If the individual filing for bankruptcy had high credit scores and a good credit history before filing, there will most likely be a significant drop in the credit scores upon the bankruptcy filing. However, if the individual’s credit was already poor, there may not be much of an impact on his or her credit scores upon the filing. Another factor is the number of accounts included in the bankruptcy. If you include a lot of accounts, the hit to your credit scores will be bigger.
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How Soon After Bankruptcy Can I Buy A Car
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Bankruptcy cases typically need to be discharged before car loans are possible unless its a Chapter 13 case and the court approves the loan. However, waiting and re-establishing credit may help you qualify and get better rates. Bankruptcies stay on your credit report for seven to 10 years, but that doesnt mean youre unable to borrow money during that time.
On the positive side, eliminating or reducing debt through a bankruptcy filing leaves borrowers with extra income to take on new debt and offers a fresh start. Creditworthiness increases as credit is rebuilt and the bankruptcy filing is further away in the rear-view mirror.
Conventional lenders may not consider applicants with a bankruptcy. Applicants may have to seek a subprime auto loan through a lender specializing in working with those who have had financial hardship and bankruptcy. When looking for a lender, be wary of loans that are guaranteed for anybody or offer no credit check. Loans with high-interest rates and fees may result in negative equity in a vehicle, where borrowers owe more than its worth.
Financing Your Car With An Auto Loan After Bankruptcy
When trying to finance your car with an auto loan after bankruptcy, you may face a tougher time finding a lender some will be reluctant to work with you. Also, once you find a lender willing to let you borrow money, you probably wont qualify for the best auto loan rate. For example, according to a 2020 automotive industry report by Experian, borrowers who have credit scores in the 501-600 range pay an average APR of 10.36 percent for new cars and 16.4 percent for used ones. In addition, some lenders will require that you make a higher down payment.
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Be Wary Of Predatory Loan Terms
Unfortunately, applying for any type of credit after bankruptcy is more complicated, and you may be turned down by several lenders. Due to the difficulty in obtaining credit, Canadians who have been through bankruptcy are a target for predatory lenders, and you need to be on the lookout for these companies that claim to offer good interest rates to those with bad credit but dont follow through. When evaluating a company as a potential lender, make sure to do your research and read online reviews and complaints carefully.
If you are offered car loan financing from a company that specializes in lending to Canadians who have been through bankruptcy, make sure to read through the fine print, every last bit of it. In particular, be on the lookout for high interest rates. While someone with stellar credit may qualify for a car loan rate from 0.00% to 6.00%, LoanConnect.ca reports that anyone with bad credit should expect to pay a rate as high as 30% to 60%. That may seem high, but payday lenders routinely lend money to customers with interest rates in the triple digits. Stay far away from loans with rates like these.
How Long To Wait Before Applying For A Post
While bankruptcy will stay on your credit report for six years, you dont have to wait that long before applying for new credit. In fact, during those six years, its important that you rebuild your credit by applying for and faithfully paying back credit of some kind . Its unlikely that youll be approved for a car loan during bankruptcy without a significant asset to secure your loan, but after bankruptcy proceedings conclude, getting approved for a car loan is possible.
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Get Your Credit Reports And Credit Scores
Yeah, checking your credit probably feels a little like pulling a bandage off a big gaping wound. Its not going to be pretty. But the lender is going to check your credit, so you might as well know what they are going to see. Besides, its always a good idea to review your reports after bankruptcy because mistakes are not uncommon.
You can get your free annual credit reports from AnnualCreditReport.com and you can get a free credit report summary from Credit.com that explains how lenders are likely to view your information. Although the lender will pull a customized credit score that likely differs from the one you see, it will still give you an idea of where you stand in general.
Pay particular attention to what the report says about previous auto loans, since those are often more heavily weighted in the credit scoring models used by auto lenders. Positive on-time car loan payments reported during and after bankruptcy can be helpful.
Connecticut bankruptcy attorney Eugene Melchionne suggests asking yourself the following questions: Was there a previous car loan involved in the bankruptcy? Was that car loan reaffirmed? If the loan is reaffirmed, then the tradeline should be showing up on the credit report.
Check Your Credit Scores
If youve recently filed bankruptcy, chances are your credit scores are on the low side. But this doesnt mean your car loan application wont be approved. And its good to know where you stand before applying so you wont be caught off-guard when the prospective lender pulls your credit history and score.
Youll have to pay a nominal fee to access your FICO score on MyFICO.com. But you can also view your credit score by signing up for one of the . You may also be able to view your credit score on your banks online dashboard or credit card statement.
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Finding A Legitimate Car Loan Lender
Finding a lender willing to give you a car loan is more difficult after bankruptcy. Start with your own bank, a credit union, or another bank. You should also consider checking with your bankruptcy attorneyhe or she might have a list of legitimate lenders who provide car loans to people in bankruptcy or just out of bankruptcy.
If you cannot obtain a loan through a well-known bank and don’t have recommendations from an attorney or other trusted source, be wary of companies offering car loans to people with poor credit. You can easily use online tools to see if you qualify for a car loan, but before you decide on a particular lender, be sure to thoroughly research the company.
Car Loans After Bankruptcy: Chapter 7 Vs Chapter 13
A bankruptcy can tank your credit scores and make it more difficult to get approved for loans, but it doesnt mean being rejected by lenders forever. Each type of bankruptcy affects your debt and credit differently. Make sure to consult with a bankruptcy attorney or non-profit debt counseling agency before deciding whether filing for bankruptcy can help meet your needs.
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Banks And Credit Unions
Depending on your bank or credit union, you may be able to apply for preapproval online or at your local branch. If you dont know which car you want to buy yet, the bank or credit union will give you a quote and letter of commitment to take to the dealership. They may even give you a blank check good for an amount up to your preapproval limit.
However, if you plan on buying a used car, many banks and credit unions have limits on the age or mileage of the vehicle.
Get A Down Payment Together
Hopefully wiping out debt in bankruptcy improved your cash flow enough that you can save some money for a down payment. I tell my clients to plan on living an entire year on a cash-only basis and build up savings before getting back into the credit game, says Melchionne. The larger your down payment, the less risk your lender is taking. After all, they also have your vehicle as collateral. Need a set of wheels right away but short on cash? A trade-in can help toward a down payment, and you may be able to get more cash for your current vehicle if you sell it yourself.
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Bad Credit Auto Loan After Bankruptcy At Irwin’s
Sometimes in life, bad things happen to good people and through no fault of their own, anyone can become a victim of bankruptcy. The single biggest cause of bankruptcy in America today is medical debt. When you add in the fluctuation of our economy that can sometimes have a negative impact on income or even employment, its easy to see just how quickly financial burdens can snowball.
We understand that no one plans on getting sick, but unfortunately, it can happen at any time. Thats when the financial worries really begin. With skyrocketing healthcare costs, many people end up paying for procedures and medications that they must have, but simply cannot afford. Medical bankruptcy is a serious problem that can place a major strain on your credit for years to come. We want to do whatever we can to help people put the dark cloud of bankruptcy behind them forever and see the beauty of the clear blue sky.
What is bankruptcy?
Bankruptcy is a federal court process that confers the legal status of bankrupt on someone who cannot repay his or her debts.
What happens after filing for bankruptcy?
Bankruptcy allows you walk away from some of your debts, but the bankruptcy remains on your credit report for 10 years.
Does bankruptcy hurt your credit forever?
No. The bankruptcy will remain on your report for 10 years, but has less of an impact as time goes on , especially if you are able to demonstrate a history of timely payments since the bankruptcy.
Applying For A Car Loan After Chapter 7 Or Chapter 13 Bankruptcy
Once you find a legitimate lender, you can apply for a loan. You will receive a copy of your discharge order from the court once your bankruptcy is over. You can submit this discharge order along with any other documentation the lender requires to process your application.
Bear in mind that your interest rate will likely be much higher than a typical car loan, and factor this into your decisions regarding how much of a car you can affordhigher interest rates mean higher monthly payments.
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Bankruptcy Auto Loans: Everything You Need To Know
If you’re in the market for a new car, getting approved for bankruptcy auto loans can be difficult, although not impossible. It’s important to keep in mind that the bankruptcy will show on your credit report for the next seven to 10 years, according to CBS News.
If you’re in the market for a new car, getting approved for bankruptcy auto loans can be difficult, although not impossible. It’s important to keep in mind that the bankruptcy will show on your credit report for the next seven to 10 years, according to CBS News. While the fresh start you get financially after a bankruptcy can be helpful, it does lower your credit scores, which can have long-term implications.
Timing Your Car Loan With Bankruptcy
If you need a new car and cannot pay with cash, you will need to finance it. If you’re in bankruptcy, you may have to wait until it’s over to get a car loan, depending on whether you filed for Chapter 7 or Chapter 13.
Chapter 7 bankruptcy. If you filed Chapter 7, you will need to wait until you receive your discharge. Chapter 7 cases typically only last four to six months. Once you have your discharge order, you can use that to show the car loan lender that your case is over.
Chapter 13 bankruptcy. If you filed Chapter 13, you can either:
- wait for your discharge, which will not be entered until your repayment period is over , or
- get court permission to take out a car loan while your case is still pending.
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Financing A Car After Bankruptcy
You may have already received letters from car dealerships offering you credit to buy a car, and its true. You should be able to get a car loan.
Should you? Think it through.
On the plus side: If you make consistent, on-time payments. A loan is a step for you to re-establish your creditworthiness. If you dont have the cash needed to buy a car outright, financing may be your only option.
The flip side: Offering you credit doesnt mean offering you good credit. Expect high interest rates maybe really high rates. Shop around and see what dealers or lending institutions are going to charge you.
Shop For The Right Lenders
When choosing a lender, you should shop for loans just as you would at any other time however you’ll need to concentrate your search on lenders that specialize in providing car loans during a bankruptcy. You can visit websites like WashingtonAutoCredit.com and AutoCreditExpress.com as these lenders are well versed in helping people purchase a vehicle during a bankruptcy.
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The Process For Buying A Car After Bankruptcy
Filing for bankruptcy and wiping out your credit score, as well as your debts, can be stressful. On top of that, attempting to make a major purchase like buying a car can seem daunting.
But heres some positive news. Getting a car loan after bankruptcy is possible in many cases. Youre not the only one to go through the bankruptcy process, and there are lenders ready to consider the financing needs of consumers in this situation.
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