There's no set rule for how long someone should wait before applying for a post-bankruptcy auto loan. But if it's immediately after the bankruptcy is discharged, the buyer needs to be able to provide a copy of their discharge papers when they apply for financing (as their credit reports may not reflect the discharge).
How to Prepare for Getting an Auto Loan after Chapter 7 Bankruptcy
With a lower credit score, it can be unclear whether or not financing is even an option. But the good news is that there are lenders out there willing to work with post-bankruptcy buyers who don't have the best credit. Here are a few things that any car shopper with credit issues should consider before applying for an auto loan.
Credit reports and scores should be checked. Even if it's clear to the bankruptcy filer that their credit is bad, they should know exactly where they stand before trying to buy a car. This way, they'll have an idea as to what kind of interest rate they can expect.
In the US, consumers are entitled to a complimentary copy of their credit report from each of the three primary credit bureaus every 12 months. Consumers can easily obtain copies by visiting AnnualCreditReport.com. There are other sites that offer free access to credit reports, but this one is authorized by Federal law. As for credit scores, FICO ratings are available from TransUnion, Equifax and Experian for a small fee. Or, there are several websites that offer free scores (typically non-FICO) to consumers who set up accounts with them.
The buyer should have an understanding of their unique situation. There are many reasons why consumers file for bankruptcy, and a lender may take these reasons into consideration. For example, if someone had a good credit history up until a specific event, this person will generally be viewed more favorably. Such events can include a failed business venture, a job loss or a sudden illness that resulted in expensive medical bills.
Even if someone has mismanaged credit, if they at least have a good history with car loans, this can count for something. In fact, there is such a thing as an automotive-weighted credit score that lenders use to assess a buyer’s history of managing car payments.
The buyer should anticipate a higher interest rate. Car buyers with bad credit, including post-bankruptcy consumers, generally pose more of a risk to lenders. So, in order to offset this risk, applicants with lower credit scores usually receive higher interest rates.
With this in mind, anyone who is looking to finance a vehicle after bankruptcy should be realistic about their car buying budget. The first vehicle purchased post-discharge should come with a modest price tag. Ideally, this car should be the most practical option available – it should run well enough to not generate pricey repair bills. It should also come with affordable payments the buyer can make on time to gradually improve their credit score.
Finally, post-bankruptcy car buyers should know that there is help available. In a perfect world, everyone who emerges from Chapter 7 bankruptcy would have enough time to improve their credit before purchasing a vehicle. But at CarsDirect, we understand that the need for a car is often immediate. And that's why we are happy to offer our assistance to consumers who've been through a bankruptcy or have sustained damage to their credit for any reason.
Auto Loan Assistance after Chapter 7 Bankruptcy
If you've completed a Chapter 7 bankruptcy and need to buy a car, CarsDirect can help. We can match you with a dealership in your area that specializes in finding auto loans for buyers with credit issues.
Our process is easy and fast, and the service that we provide costs nothing and is obligation-free. So, there's no reason why you shouldn't contact us and simplify your car buying experience. Just fill out our simple and secure 1-Step Auto Loan Request to get started today.
