Post Bankruptcy Car Loans: How Long Should I Wait

With the state of our Nation's economy, the number of post bankruptcy car loans have increased over the past few years. This influx of potential vehicle buyers with poor credit, discharged bankruptcies, and even undischarged bankruptcies, have caused car dealers to become creative to get customers into the cars they are trying to sell. You can still find many loan offers provided by high risk lenders (for extremely high interest rates), or in-house financing, regardless of credit. Knowing the best option for you, and more importantly, the best time after bankruptcy to get another car loan will be important to save you stress and headaches later.

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Your best option may be to get a cheaper vehicle that you can pay for in cash. If you wait until your bankruptcy is discharged, you can then rebuild your credit for a few years with small amounts of credit with other sources. Doing this should allow you to get a car loan for a reasonable interest rate within 2-3 years of your bankruptcy being discharged. Of course, that is not a realistic option for some people who may opt to go with a high risk lender, and pay the higher fees, in order to have a newer and more reliable vehicle with a warranty.

Many people are going the route of the high risk loans soon after their bankruptcies are discharged. While there are higher interest rates involved, there is a positive aspect above having a newer car with a warranty. High rate loans can also work in your favor to help you rebuild your credit. For instance, if you purchase a car well below your means and make double payments on the loan, you will find that not only do you cut a lot of that interest out, but you also improve your credit rating at the same time. Even high risk lenders will report your credit like any other lender. A good word from them will do wonders for your credit. Of course, research is key. Make sure to find out as much as you can about the local high risk car lots and their lenders to make sure you don't end up with a lender that you later regret.

The riskiest option available is in-house financing. In-house lenders make their money by selling the dealer's vehicles with a higher profit margin, and often for much higher than you can find similar cars for sale in the classifieds. Usually, the dealer has very little investment in the car, and sometimes the down payment you would put down covers that. Since many of these cars are cheaper or older, you can end up with a car that becomes a major headache soon after purchase. Make sure to do your homework about the car you are buying and the dealer from whom you purchase.

Going through bankruptcy can be a troubling time for many. Making sure to research your options fully, and having credit rebuilding goals after bankruptcy, will insure that you make the right decision given your circumstances.