If you been through bankruptcy, buy a car can be a daunting task. One of the consequences of bankruptcy is a harder time to get a loan and when that happens, you will pay a higher rate of interest.
Although it is harder, you can still buy and finance a car if you have poor credit as a result of filling bankruptcy. The current economic slowdown will work in your favor if you plan on buying a car and financing it at the dealership.
I will be outlining some of the challenges and questions you should be asking yourself before going out an buying a new car. I will also give a few pointers to help you increase your chances of getting the right loan for your new car.
First you have to understand why lenders would be reluctant to lend to you. After all you already filled for bankruptcy once.
You will find lenders that specialize in lending to borrowers with a previous bankruptcy. But before you approach a lender for a loan, you should have already started repairing your credit.
You should shop for a loan with online lenders, specialty local lenders, and with the car dealership where you plan on buying your new car.
Since different lenders have different requirements, shopping for your auto loan online can be extremely convenient. Some lenders might require than the bankruptcy be discharged. Also, have no incidents within the previous year is also a plus. Obviously you also have to meet age and minimum income requirements to qualify for the loan.
Here are some things to do before buying a car:
* Try increasing you credit score – Take out a collateralize credit card for example and make some timely payments. You should also verify that the information is being reported to one of the major credit agency. If possible, also try to get a small, unsecured loan from a local bank.
* Try to get your loan pre-approved before negotiating the car purchase. This will be helpful in getting the best price possible for the car.
* Get someone to co-sign your loan Remember that the co-signer will be held responsible for the loan should you fail to make payment.
* Negotiate the price of the car and only then negotiate the loan terms. Chances are the dealer pulled your credit report already. If he is still talking to you its because he can close on a loan.
Always consult with the BBB (Better Business Bureau) to see if there have been any complaints against the lender.
Consider joining a credit union?
One other option you might consider for your car loan is joining a credit union. Credit unions offer their members above average deals on car loans. You can qualify for these loans if your bankruptcy is over one year old and you are incident free since the filling.
You can search online for a credit union near you. Fill out the online form with a few question that will help match you up with the right credit union.
Should you be buying a car?
Buying a car after going through bankruptcy might be very important to help you regain your footing, but don´t settle for a loan with an excessive rate, or any kind of abusive clause, such as excessive late payment or pre-payment penalties.
Don´t limit yourself to looking solely at the monthly payment amount, compare the life of the loan. Depending on the age of the car, you don´t want the life of the loan to extend beyond the life of the car.
Finally, you should consider if buying a car after bankruptcy is the right thing to do. Should you wait a little longer before buying a new car? Can you settle for a much lower priced used car?
Consider these questions one last time before starting the search for your car and loan.
