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Can You Get a Bankruptcy Car Loan?

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A bankruptcy car is not only within reach of someone almost immediately after the completion of a bankruptcy case, but it may be possible to get somewhat competitive rates after only a few months. The problem with companies that claim they offer the cheapest bankruptcy car loan is that many of the promises and guarantees are simply not true. However, if you're willing to spend a little time to research the market, you could end up with a surprisingly good deal on a bankruptcy car loan.

Why Would a Company Offer a Bankruptcy Car Loan?

The federal rules of bankruptcy actually offer car lenders with some protection. A person who has filed for bankruptcy is prohibited from filing a second time for bankruptcy for a minimum of two years, depending on the type of bankruptcy involved. The time frame could be as much as 8 years between Chapter 7 filings, which are the most popular form of individual bankruptcy. So for someone who just completed a bankruptcy case, a company offering a car loan or refinancing knows there can't be another bankruptcy for at least two years, and perhaps many more. Additionally, a bankruptcy car loan usually comes at a much higher interest rate, which means more profit for a car loan company.

Steps for the Best Deal on a Bankruptcy Car Loan

  • Check your credit score. Don't be surprised if it's in the 500s - a bankruptcy is the single biggest blot on a credit report. However, it also may be a little higher than you think.
  • Correct any errors. More than two-thirds of all credit reports contain some type of error, according to experts, and a mistake in your credit report could be taking points away from your credit score.
  • Consider waiting. If your credit score is in the mid 500s or higher, consider waiting at least 3 to 5 months to pursue a bankruptcy car loan or refinancing, if you are able. The more you pay bills on time and handle your finances properly after a bankruptcy, the more your credit score is likely to increase.
  • Research subprime companies. However, if your score seems too low, or it's important that you get a car right away, get bankruptcy car loan quotes from a number of companies that offer so-called "subprime" loans. Sub-prime simply means that your credit score is below most people, putting you in the sub-prime category that means you'll pay more money to borrow money.
  • Consider a refinancing. While a subprime bankruptcy car loan can mean an interest rate much higher than the best rates available on the market, it's possible to wait a relatively short period of time and consider refinancing the loan. In six months, it's possible that your credit score will have improved enough so that you don't have to seek a bad credit auto loan.

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