Bankruptcy can be a stressful headache. Nobody declares bankruptcy because they want to—you ended up in a situation that you couldn’t escape without help, and bankruptcy cleared many, if not all, of your bad debts away. The problem is, now it will haunt you for up to ten years, and you need a new car to get to work, so you don’t get into even more trouble. How can you do this without good credit?
Fear not—financing a car after bankruptcy isn’t rocket science. It requires many of the same steps as getting a loan on good credit. Here are some things to keep in mind when you go to purchase a new or used vehicle.
Car Loans Are Secured
Car loans tend to be easier to get than personal loans because they are secured. This means that you are borrowing money against the car itself—if you don’t pay, the lender takes the car and sells it to recoup their funds. This may sound scary, but it’s very standard regardless of your credit history, and once you pay off the car, it’s yours.
This means that while your interest rate may be a bit higher than those of people with good credit, you may be surprised that dealers can still finance you.
Don’t go after a Jaguar or a Corvette. This should be common sense. If you are coming out of bankruptcy, target a vehicle that will be economically sound, reliable, with good gas mileage and will get you where you want to go. Look at compact cars and other economy models. Not only will these cars be more affordable, lenders will see this as a responsible decision.
Examine Your Options
There are a surprising amount of options out there these days. Don’t jump to agree to the first offer that comes along. In fact, beware of early offers, especially those that cater to people with credit problems. These offers will be at severely sub-prime rates and you can end up paying exorbitant interest rates on your loan, which could result in you getting in over your head in debt all over again.
Get quotes from several companies, and look at places like your personal bank or a credit union, if you belong to one. These places may be willing to overlook prior credit problems in favor of your personal relationship with the institution. Peer-to-Peer lenders, who are individuals that direct loan money, will also listen to personal stories over credit history.
Take time and do your homework. You may find there are better options than you realize.