Getting a Car Loan with Bad Credit after Your Vehicle Is Totaled

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Meghan Carbary has been writing professionally for nearly 20 years. A published journalist in three states, Meghan honed her skills as a feature writer and sports editor. She has now expanded her skill-set into the automotive industry as a content writer for Auto Credit Express, where she contributes to several automotive and auto finance blogs.


, - April 30, 2019

Dealing with the aftermath of a total-loss collision is never easy, and the last thing you need is a complicated process to replace your vehicle. Hopefully, you keep a rainy-day fund for emergencies such as this, but not everyone is prepared. If you're facing car replacement after a total-loss accident and you have bad credit, it can be doubly tough.

Getting Paid by Your Auto Insurance Company

When your vehicle is totaled, the amount that you get back from your auto insurance policy depends on your coverage and the laws in your state. In the event of a total loss if you have full coverage, your insurance company typically pays you the actual cash value of the car or the amount it would cost to repair your vehicle, less your deductible, whichever is less.

But how do they determine that your car's not worth fixing? This value also varies by insurance company. Usually, if the amount of damage exceeds 80 percent or more of the vehicle's value, the insurance company considers it a total loss.

If you owned your car, this should give you enough money to either replace your vehicle or make a substantial down payment on another car. If you didn't own your vehicle and are still paying on a loan, the lienholder has a right to be paid first. In this case, the check you receive from the insurance company has both your name and the name of your lender on it.

Because cars are depreciating assets, it's possible that the actual cash value of your vehicle is less than what you owe on your loan. In this situation, when your car is underwater, you're required to sign the check from the insurance company over to your lender and pay any balance due out of pocket (unless you have GAP insurance). If your vehicle’s value is more than the loan balance, you can keep the difference.

Finding a Replacement Vehicle

When you know how much you have from the loss of your car, and depending on your credit situation, you should be able to determine whether you need to go through a special finance dealer, a buy here pay here lot, or if you can visit a traditional dealership to get another auto loan and replace your vehicle.

Before you head to a dealer, you can research pricing with our new and used car guides. If you're looking to replace your loss with a brand new vehicle, and have the credit to do it, you can also see the current monthly deals that manufacturers are offering on new models in our New Car Deals section.

Finding a Dealership to Work With

If you have bad credit and don't know where to begin looking for a dealership to work with, we want to help take some of that stress off your shoulders. At CarsDirect, we’re teamed up with a nationwide network of car dealers that have lending resources to help people in many different credit situations. Simply fill out our fast, free, and easy auto loan request form to get the process started now!

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Meghan Carbary has been writing professionally for nearly 20 years. A published journalist in three states, Meghan honed her skills as a feature writer and sports editor. She has now expanded her skill-set into the automotive industry as a content writer for Auto Credit Express, where she contributes to several automotive and auto finance blogs.


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