Posted on: 23 March 2017Share
Contrary to popular belief, a bankruptcy does not mean that you will never qualify for an auto loan again. However, it does mean that you need to be more careful when reviewing the offers that you have available to you. If you filed for bankruptcy and are considering applying for an auto loan, here are some tips to remember.
Be Prepared for Higher Rates
Although you can still qualify to receive an auto loan, you are considered a higher risk to lenders due to your financial history. As a result, the interest rates that you encounter might be higher than you expected. Do not get discouraged, though. There is a possibility that you can garner a lower rate if you apply to a lender that you previously had a good relationship with.
The lender might be willing to offer you a better deal based on that relationship. The savings might not be huge, but it can be worth it. By working with the previous lender, you are also building towards a better credit history.
Wait Until the Right Time
Your application for an auto loan has to be timed just right. Since you filed for bankruptcy, there are rules that dictate when you can apply for new credit. For instance, if you filed for a Chapter 13, you need to request permission from the bankruptcy court before you can apply for the loan.
If you filed a Chapter 7 or you have completed your repayment plan for the Chapter 13, you can file for the loan without permission once you receive your Notice of Discharge. Waiting for the notice can also put you in a better position to get a lower interest rate.
Be Smart About Your Car Choices
Although your income and newly cleared credit history might allow you to pay for an expensive car, there is no guarantee that a lender will approve the loan. Buying a car now is more than just getting new transportation. It is about rebuilding your credit. Therefore, you need to opt for a cheaper car with a lower loan amount.
After you have reached the end of the loan, you can trade in the car and look for a new car. If you are consistent with your payments and avoid making any mistakes that could harm your credit, you can likely qualify for a better car later.
Consult with a loan officer about your options for getting approved for an auto loan.