The good news is that it is entirely possible to obtain an auto loan after a bankruptcy discharge thanks to the abundance of auto loan choices today; however, there are some factors that you want to take into consideration. There are a number of car loan companies that offer auto loans to people that have recently obtained a discharge in their bankruptcy. Such companies offer secured auto loans to people with a bankruptcy on their credit. While the process of finding a company to give you an auto loan may not be that difficult, it’s important to weigh your options before buying a new or used vehicle.
If you are wondering if you can get an auto loan, you may not have a hard time but you want to ask yourself, “Is purchasing a new car the best option?” You can choose not to buy a new car at all. If you have a car that is running well, you can decide to keep it and there are other ways to rebuild your credit that may cost you less.
You can pay cash for a car. If it’s a feasible option, you can save up money to pay cash for an affordable used car in good working condition. The car doesn’t have to be the newest model, it just needs to run well enough that you won’t have to pay for any major maintenance. For example, if you don’t need a new car right away and if you don’t have a car payment, you can set aside money each month that would be equal to a car payment and by the time you’ve saved up enough, you can pay for a used vehicle in cash.
If you have to purchase a car, you can choose to purchase an inexpensive vehicle. Since interest rates on auto loans after a bankruptcy can reach 20%, it’s important to purchase an inexpensive car that you can easily afford with your current financial status. Of course, if you have the financial resources you can buy an expensive car, but it’s not advisable, especially since you will want to refinance your auto loan in six to twelve months.
If you do opt to get an auto loan, make sure that you choose one without a prepayment penalty and be sure to negotiate the price of the car down. Generally speaking, when you purchase a car from a local dealership, there is a profit margin built into the price. While the dealer expects to make some profit, it’s a good idea for you to know the value of the vehicle you’re purchasing.
Once you have secured an auto loan following a bankruptcy discharge, make sure that you pay all of the payments on your car loan on time. When people pay their auto loans on time each month, their credit score improves, thereby allowing them to take advantage of more competitive rates in the near future. With your improved credit rating, the rates available to you will definitely decrease, and you should take advantage of these reduced rates within six to twelve months of purchasing your vehicle. Your decreased rate can reach as much as half of what you’re already paying, and that means a huge savings if you refinance your auto loan.
For more information about filing a Chapter 7 or Chapter 13 bankruptcy and when you can obtain credit cards, auto loans or mortgages after a discharge, contact me, attorney Rick Flume to schedule a free consultation where we can evaluate all of your available bankruptcy options.