The process of buying a car after bankruptcy
Filing for bankruptcy and deleting your credit and debts can be stressful. Also, trying to make a big purchase like buying a car can be intimidating. But here is some positive news. In many cases, it is possible to get an auto loan after bankruptcy. It is not the only company going through the bankruptcy process, and there are lenders who are willing to take into account the financial needs of consumers in this situation.
How long after bankruptcy can I buy a car?
Most people who file for Chapter 7 bankruptcy sell the debtor’s unpaid assets and forward the proceeds to the creditors. Filing a bankruptcy application in accordance with Chapter 7 takes approximately 120 days or four months before closing the file and settling debts. Bankruptcy can remain in the debtor’s credit report for up to 10 years.
The other main type of personal bankruptcy is Chapter 13, which is designed to allow people on a stable income to keep property that might otherwise be lost during the bankruptcy process. There is a plan whereby the debtor can pay all or part of the debt to the creditors for three or five years. A Chapter 13 bankruptcy can remain in the debtor’s report for up to seven years.
You don’t necessarily have to wait years to buy a car; you should take the time to rebuild your credit before applying for a car loan after bankruptcy. Debt.org, a debt relief organization, recommends that you apply for a secure credit card and pay for it monthly for 12 months before switching to an unsecured credit card and seeking an auto loan. A positive credit history contributes to your creditworthiness. This is a key factor in deciding whether you qualify for a car loan and what interest rate you could get, according to the Office for Consumer Protection in Financial Matters (CBPB). The longer the story takes, the more information there is to improve how it is viewed as credit risk, the office said
Get a car loan after bankruptcy
Do your homework. The CFPB urges consumers to review their credit reports before applying for funding. Note the errors that may be taken into account in your car loan application. You can request a free copy of your credit report from one of the three major credit reporting agencies once a year. See the CFPB website for more details.
It can be helpful to budget and calculate how many cars you can realistically pay for. Calculate the total amount of your loan using an accessibility calculator and familiarize yourself with the monthly payment calculator to understand how different interest rates and loan conditions affect potential payments.
Compare lenders. Even after bankruptcy, when looking for financing, there are many options that you can use to compare interest rates and loan terms. While it is possible to get approved for a car loan after bankruptcy, you should be prepared to receive a higher interest rate or possible down payment that you might not have received had your loan been perfect. This can also be the case if you have a high income.
A couple in a parking lot looking at a blue car. Getting pre-approved for your financing can also help your position by purchasing a car after bankruptcy. If your application is approved, you have the advantage of knowing the conditions of your car loan before buying a vehicle. B. the interest rate, the loan amount, the monthly payment and the term of the loan. In addition to streamlining the financing process, you can focus on exchanging and selecting a vehicle at the dealership, according to the CFPB. CarLoanDealer.com is a direct car lender that allows qualified applicants to obtain pre-approval online. Applying for a car loan after bankruptcy takes only a few minutes and you will get a decision in seconds.
If a lender approves your request, you can start buying a car. Note that the loan amount can only be enough to buy a used vehicle because your creditworthiness has been compromised.