How Do You Get A Car Loan After Bankruptcy

Obviously, filing for bankruptcy creates a big dent in your credit score. Bankruptcy remains on your credit report for a period of seven years and may cause any applications for a loan to get rejected.

After you have filed for bankruptcy, if you want to buy a car, you don’t have as many options available as previously. However, you can usually get approved for an auto loan through so called, sub-prime lenders. Sub-prime lenders specialize in financing auto loans to people with bad credit and/or recent bankruptcy. If you repay the loans per your repayment schedule, it can help rebuild your credit report and improve your credit rating.

Most car loans after bankruptcy can be applied for approximately two years after filing for bankruptcy. The reason for the two year waiting period is that it gives the lender time to evaluate you on how you have managed your finances during this time frame, post bankruptcy. There are also very specialized lenders, mostly online, that will offer car loans to people with bankruptcy filings within the two year time frame. It pays to research what is available as banking rules and regulations change almost daily.

Car loan applications will often ask if and why you have declared bankruptcy. Make sure to explain your financial situation when prompted and to include why the bankruptcy occurred as well as what you have done to clear up your credit situation.

Tell The Lender The Truth About Your Situation

If the lender discovers that you have not changed your fiscal ways and you are leading the same lifestyle as pre-bankruptcy, then rest assured that your loan application will be rejected. However, if you have changed after your recent insolvency, have started making responsible financial decisions, and are taking the necessary steps to improve your financial situation, then there is a good chance that you will be given the car loan.

In addition, the secured nature of car loans contributes greatly to the approval process of applicants with past bankruptcies on their credit reports. The car to be purchased is used as collateral for the loan and in case of default the lender can recover his money by forcing the sale of the vehicle so he can reclaim his investment.

Once you are approved for a car loan, don’t forget the possibility of future refinancing. By making your payments on time with all your bills, in a year or so you could easily qualify for considerably lower interest rates. In three years, you can raise your credit score enough to be eligible for even lower rates. There is help available after bankruptcy, so don’t despair and get back on track to financial security.