Tips to help secure a car loan after bankruptcy

 Posted on January 04, 2022 in Bankruptcy and Car Equity

Going through bankruptcy may make it harder for lenders to give you a loan, but it is far from impossible. Lenders are indeed on the lookout for red flags that signal somebody is a financial risk. Still, if you want to buy a new car after your bankruptcy, you may find a lender willing to take a chance on you.

If you plan on getting a new car following your bankruptcy, think about how you might secure a car loan. Credit Karma describes some steps that may help you find the right lender as well as avoid a loan with unfavorable terms.

Take time to rebuild your credit

If time is not of the essence, you could spend time rebuilding your credit so that you may find a loan with a low-interest rate. Consider requesting a copy of your credit report so you can check your credit score following your bankruptcy. From there, you could explore options that may help you raise your credit score, like getting a secured credit card or becoming an authorized user on a relative's credit card.

Save for a down payment

A lender may feel better about giving you a loan if you can make a down payment. The higher the down payment, the greater the chance you should have to secure a loan. Usually, lenders are comfortable if a person makes a 20% down payment on a car. If you do not have enough money for a down payment now, you might want to wait until you have saved enough to make a payment.

Ask someone to co-sign with you

If finding loan approval proves difficult, you might consider asking someone to co-sign with you. Your co-signer may be a family member with strong credit. Bringing a co-signer along may give your lender confidence that you can pay back the loan despite your past debt issues.

Beware of high-interest rate loans

When you are ready to shop for a loan, take your time and compare different rates and loan terms to find one that works for your situation. Do not rush into a loan even if it seems perfect for you. Some lenders offer "buy here, pay here" loans that do not check your credit history. However, they tend to offer high-interest rates that may make the loan more expensive than what you want.