Buying a Car After Bankruptcy
The question isn’t if you’ll be buying a car after bankruptcy, but under what terms are you willing to say yes to a car loan? According to many debtors, solicitations for car loans come shortly after they file for bankruptcy. It’s important, however, to realize that bankruptcy doesn’t cut off all your options when it comes to buying a car after bankruptcy.
What to Consider if You Want to Buy a Car Right After Bankruptcy
- Don’t rush to take advantage of the first offer you get in the mail, fearing that no others will arrive. There are a number of dealers who focus part of their business on customers with poor credit. Your offer will be at a much, much higher interest rate than other customers and it’s possible you can get a much better deal.
- Pick some car dealers in town and call them once you have your discharge notice in hand and are ready to begin the process of buying a car after bankruptcy. Tell each dealer you need a car and just got a bankruptcy discharge and then compare the terms that any offer. Remember that a bankruptcy discharge tells someone that you have erased virtually all of your debts and are probably in a better situation to pay for a car loan, as long as you have a steady source of income.
Consider Waiting After Bankruptcy to Buy a Car
- The issue here is your credit score. The higher your credit score, the more it costs to get credit for things like car loans. If you are able to wait months or longer to buy a car after bankruptcy, you have the chance to build up your credit score. Most experts advise that you first get a copy of your credit score and correct any inaccuracies. Then, solicit banks and credit cards for an unsecured credit card. This may seem like a bad idea – for many people, credit was a major reason that led to bankruptcy. But improving a credit score requires continuing to use credit responsibly. If you can’t qualify for an unsecured card, put up some money for a secured card. Make sure the card reports to all the credit bureaus. Make a purchase each month and pay it off completely. In a matter of 6 months, you will notice a significant increase in your credit score.
- Waiting after bankruptcy to buy a car is also a good idea because you have a chance to save some money. Putting down 10 percent or more on a vehicle not only lowers your monthly payments but generally qualifies for more favorable rates.
- Set a reasonable goal for your credit score – perhaps the mid 600s or higher – before you think about buying a car after bankruptcy. Compare the car loan terms each dealership offers and choose one you feel comfortable with. Some financial experts say talking openly about your bankruptcy and showing your discharge papers can potentially lead to a better deal. Remember that buying a car after bankruptcy can lead to a pretty good deal, if you are willing to put in the time and effort.