After the 2008 mortgage crisis, society became more understanding to the fact that anyone can fall upon tough times. The event triggered a global recession and helped lessen the stigma of defaulting on loans.
Debtors can still feel as if they have no hope of getting an auto loan once they have decided to file for bankruptcy. Fortunately, finding a loan after bankruptcy is possible. It only requires some searching and some careful monitoring of your finances once you secure a loan.
New auto lots and franchise banks are less likely to give you a loan after declaring bankruptcy. When they do, you may abide by strict repayment terms and have high interest rates.
Typical rates hover around 4-5 percent for those that can find them. After declaring bankruptcy, you may see a lot of offers easily doubling these amounts. Try to avoid interest rates 15 percent or higher if you can help it; these may hurt your ability to rebuild credit.
Another option for finding a loan is to visit your local credit union. They are typically more generous and understanding to those who live and work in the community.
Outside of credit unions, there are smaller lending institution that specialize in car loans or loans to people with troublesome credit history. Always try to review and compare terms with these organizations since you will have many options at your disposal.
BKCarFinance offers a unique auto financing solution for people with bankruptcies or other credit problems. Our integration with bad credit car financing companies provides the opportunity to receive up to four loan offers from the privacy of your home.
Any lender is likely to be more favorable to the idea of lending you money if your financial troubles did not stem from missing car payments.
Using a Car Purchase to Recover from Bankruptcy
Once you are able to secure a car loan, you are in a great position to rebuild your credit. Making payments on time will demonstrate fiscal responsibility and a dedication to fixing your blemished past. Here are even more ways to help you stay on track:
- Find a reliable used car with mileage lower than 100,000. These will be cheaper and easier to secure financing for.
- Make as large of a down payment as you can. This tactic will help reduce your interest rate.
- A cosigner can help you get better loan terms, but make sure it is someone you trust.
- Set aside savings for several payments in advance if possible. This strategy will help you avoid missing payments should you suddenly become strapped for cash.
Refinancing Can Help
Once you have made payments on time for six to eight months, your credit score may have improved. Refinancing after this period will help reduce your interest rate and get better loan terms.
Just like with finding your initial car loan, shop around for the best deal when refinancing.
Compare the fine points such as interest rate, loan terms and monthly payment amounts. Try to arrange a large enough monthly payment to be comfortable for your situation while still clearing the loan away as quickly as possible. Calculating the total amount you will spend on the loan including interest will also let you get a “big picture” assessment on how helpful a refinance plan will be.
These strategies will aid you in your mission to get back on the road. If you are careful with your spending and make your payments on time, your car purchase can be a foothold towards establishing better credit and leaving your troublesome past behind you.