If you are stuck paying off car loans after a bankruptcy, it's important to make sure you do research and have a clear understanding of your situation before you make any changes to your financing. Each situation demands different responses.
I Kept My Car in Bankruptcy
If you were able to keep your car during the bankruptcy proceedings, then you have an important advantage. Many people are able to keep their vehicles and homes, as long as they are current on the payments for those items.
Before you file for bankruptcy, if you are interested in keeping your car, get current on those payments.
Once you have filed for bankruptcy, that car is going to be an important asset for you. You will need to immediately begin making regular payments on the car and keep current with your obligations. This will help a great deal in rebuilding your credit score and give you a current payment history.
You Need to Purchase a Car After Bankruptcy
If you have recently gone through a bankruptcy and you need to purchase a car, you have a few choices.
The best choice you can make is to save up a few hundred to a thousand dollars, and buy an older car for cash.
While there are many cars that cost $1,000 or less, there are not many of those cars that you really want to buy. Look in respected consumer magazines and find lists of the most reliable used cars and purchase from that list.
If you are not able to wait a few months to gather up the cash, then you may need to buy a car on credit. You want to shop around carefully, because many dealers will try to take advantage of your situation in order to profit from it.
Beware of those who offer you an extremely high interest rate, then tell you that you can refinance to a lower rate in a year. This is a ruse that unscrupulous dealers use to profit from car loans with predatory rates. Most of these dealers realize that you will have a difficult, if not impossible, task ahead of you when you attempt to refinance, and that you will likely be stuck with the high interest rate.
Selling or Trading in a Car After Bankruptcy
If you own a car after bankruptcy and you decide you want to sell it or trade it in on a new car, you need to do some research before you attempt to complete the deal.
Make sure you know what your car is worth. Using an online site such as Edmunds.com can give you an excellent idea of both what a dealer would pay and what a private individual would pay for your vehicle.
If you own your vehicle outright, it is often better to sell the car on your own, then take the money to the dealer or the bank and get a loan on a newer car using that money as a down payment.
Even with a bankruptcy, you should be able to get a reasonable loan with a down payment and a reasonable credit score (above 600).
Wait a few months if necessary to increase your credit rating.
It is a concern naturally to wonder 'What is filing for bankruptcy going to do to a car loan?'. It depends on what type of bankruptcy you are filing. A chapter seven filing will liquidate all of your assets to pay your debts. This means your car will be repossessed and sold in order to pay off your car loan. If you are filing a chapter thirteen bankruptcy, your debts will be restructured. This means that the bank or finance company that has title to your vehicle will rewrite the loan to lower the payments. This can be done by lengthening the term of the loan or revaluing the vehicle and the loan amount.
How Long After Bankruptcy Can You Get a Car Loan with Reasonable Rates?It's common to ask, 'How long after bankruptcy does it take to get a decent car loan?'. It really depends on you. After filing bankruptcy, your number one priority should be reestablishing your credit rating. This can be done by getting a secured credit card, having utility bills and other monthly accounts in your name, and paying them on time. It will take time. In a best case scenario, it will be one to two years before your credit report will warrant a prime rate loan. The bankruptcy will be on your credit report for seven years. If you continue to pay bills late, it will take much longer to qualify for a decent loan. While it is possible to get a car loan shortly after a bankruptcy, your rate will be much higher.
Will a Car Loan Help You Get Good Credit after Bankruptcy?Yes, a car loan can help you get credit after a bankruptcy. It will only help your credit if you make the payments on time. After filing bankruptcy, your first priority is to re-establish your credit rating. In order to do this, you must prove you are creditworthy. Getting a loan or a secured credit card is a great way to go about it, provided you stay current on your payments. If you miss payments or are late on a car loan after a bankruptcy, it will actually hurt your credit rating, so make sure you can afford the car you purchase. Expect to pay a higher interest rate for loans while you are rebuilding your credit rating.
