How to Get A Car Loan After Bankruptcy

After filing bankruptcy, one of the first major purchases you may be faced with making is an automobile. Because of the bankruptcy filing and the problems you had with your credit that led to the bankruptcy filing, your credit score is likely very low. Getting a car loan after bankruptcy is much easier than getting a home loan after bankruptcy; however, you should be prepared for the differences between a good credit and bad credit automobile purchase.

The value of the car depreciates as soon as you drive it off the dealership lot, whether the car is a new car or a used car; however, a new car will depreciate faster and more in the first six months. Finance companies will wish to protect themselves against a potential loss if it is necessary to repossess vehicle. Because of that they may require a large down payment in order to finance the automobile. To qualify for a car loan after bankruptcy, you should be prepared to pay 20% down on an automobile purchase or more depending on how quickly the vehicle depreciates.

Due to the non-desirable credit rating, you will not qualify for the best interest rates on your car loan. Expect to pay 5 to 10% more in interest charges in order to get a car loan after bankruptcy. After a year or two of timely payments, check into refinancing the balance on the car because your credit score should have improved over time.

You should structure your car loan for the minimum repayment term possible. That will allow you to pay more toward the principal of the vehicle in a shorter amount of time, and the interest rate offered for shorter-term loans is usually a little better than that offered for longer-term loans.

In order to speed your credit recovery following bankruptcy, you should begin work immediately on improving your credit rating. Improvements to your credit can help you obtain a better car loan interest rate.