How to Get a Car Loan After a Foreclosure and Bad Credit

January 27, 2012

Car loan after foreclosure, bad credit and bankruptcy don’t necessarily preclude car loans being offered. There are many car loan companies these days that specifically focus on individuals with poor credit histories that need access to a car. In fact, bankruptcy car loans or adverse credit car loans are being offered even following foreclosure and with the prospect of open bankruptcy. These advertisements are not especially misleading but with bad credit already hanging over an individual’s head, it is always as good to understand in a bit more detail how car loan after foreclosure, bad credit and bankruptcy car loans can be offered so comparatively easily.

Step 1: Making a Larger Down Payment

There is little difference between a loan from your high street bank and one from a direct finance company in generic terms. However, when you apply for a car loan after foreclosure and have bad credit you can expect to pay a higher rate of interest as well as putting a larger down payment, or deposit, on the automobile you would like to purchase. Although it would be far better for you to obtain credit for your car from a high street bank, these mainstream lenders invariably would not touch somebody with the prospect of bankruptcy or foreclosure hanging over their heads.

Step 2: Variable Deposits and Varying Interest Rates

Each US state has its own regulations when it comes to the legality of bankruptcy car loans or car loans after foreclosure and bad credit. Regardless of the state, you would be expected to make an increased down payment. However, the amount is often in direct correlation to the severity of an individual’s bad credit.  You could expect to pay from 20% to 50% of the automobile’s value. Similarly, the interest rate is also dependent on the depth of the bad credit as well as being affected by the state the individual lives in. Nevertheless, interest rates could range from 5% to as much as 26%.

Even when somebody’s credit history is pretty dire, there is bound to come a time when it becomes necessary to try to obtain a short-term loan. Unfortunately, following foreclosure or after bankruptcy there are few companies that will consider loaning money without substantial collateral. In cases such as this people who are lucky enough to own their own car outright often use these cars as the required collateral to obtain a loan. Bad credit loans in this category often attract an interest rate of a massive 144% per year.

Step 3: Amortization

This is the length of time necessary for the loan to run the full length of its contractual term as long as the payments are kept up-to-date and paid regularly. For car loan after foreclosure, bad credit or bankruptcy, the term of the loan is shorter than offered to people whose credit history is good. Instead of the 5 to 7 years that is the norm for standard loans, a person who has been provided with a car loan after foreclosure and bad credit will usually be expected to repay it in full within 2 to 4 years. The obvious outcome of this means higher monthly payments for the person with a poor credit history.

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