Post-Bankruptcy – When You Can Apply For Credit Again

Applying for credit again is something that many people who have filed for bankruptcy are interested in. In general, there is a desire to have some credit available to them. You may be one of these people, and if you’re like others, it may not be a credit card you’re looking for or an auto loan after bankruptcy. It is common for people to need a car after bankruptcy but not have enough to pay cash for one.

Is it possible to get an auto loan after bankruptcy?

Although many people think it to be impossible to get a car loan with a bankruptcy on their credit report, the truth is that people are able to finance a car loan without any trouble at all. However, there are catches to this, and you must be prepared for them when looking to buy a car.

The interest rates will be high

This is obvious. Anyone that has gone through bankruptcy is going to be a high risk to loan money to. Interest rates for a car loan are going to be much higher than someone with good credit will receive, but if you need a car to get or maintain a job, it is often worth paying the higher interest rates.

The car will be used

It is much easier to get financing for a used car than a new one because much of the depreciation will have already occurred. A new car drops in value the moment it is driven off the dealer’s lot, and the outstanding money owed on a new loan will be much higher than the car is worth. Financing for a used car will mean that the difference between the value of the car and the loan will not be as great, so if you do not pay, the car can be repossessed and sold to get most of the loan money back. This means that the lender is at a lower risk with a used car than a new one.

Down payments will be higher

In order to lessen the risk of loan default more, the lender will often demand a larger down payment from the borrower, so the amount financed is in line with the value of the car.

Limited choice of car models

If you go to a dealership that carries their own financing, you may find out that you can get a car through the dealership. These car dealers are usually large operations and sell many cars, but even with a large car dealer, they will have a few cars in their inventory that are unpopular. There is no demand, and they are simply sitting on the lot taking up space. These are the cars that dealers are more than happy to sell to someone with a bankruptcy on their credit report. The interest rate will still be high, and there will still be a requirement for a down payment, but a dealer carrying their own financing is often motivated to approve a loan to sell their unpopular inventory.

Where to get a loan

It is possible to get approval on a loan first, and then shop for a car that is compatible with the amount of financing you are approved on. This is usually the best way to approach the problem. The best place to start shopping for an auto loan after bankruptcy is the Internet. There are many lenders that will compete for your business. This doesn’t mean that any of these lenders will offer you financing that are as good as someone without a bankruptcy on their credit report, but it does mean that the chances of being able to obtain financing for a car are better.

As long as you are gainfully employed and can show proof of income, an auto loan after bankruptcy is possible, and people get these loans every day in this country. Just keep in mind the limitations on the terms of the loan, and you should be able to get yourself a car.

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