Applying for a car loan after bankruptcy does not have to be a difficult process. In fact, many people have successfully obtained a car loan the day after being discharged. Re-establishing your credit is of the up most importance after your bankruptcy has been discharged and applying for an auto loan is one way to help build back your credit history. To simplify the approval process, follow these simple tips.
The best way to ensure your application will be properly reviewed by a lender is to review your credit report. It is not uncommon for accounts to have balances remaining on them. It is also a good idea to contact both Equifax and Transunion to include a memo that describes the reason for your bankruptcy. Often times a lender will approve you for a better rate due to extenuating circumstances.
It is important to set a budget for your monthly car loan payment. Knowing what your desired payment should be, ahead of time, will help you decide which finance package is right for you. Many factors go into determining how your auto loan will be set up such as amount financed, rate and term. Going through a pre-approval process takes the guess work out this confusing scenario. By submitting an online credit application, a dealer will be able to identify what the maximum amount that a lender will offer you which will give you the ability to customize your car loan’s terms.
Be Prepared to Offer an Explanation
When applying for a car loan after bankruptcy, most lenders will want an explanation as to what led to the bankruptcy as well as what has been done to resolve the situation including improvements to your financial picture.
Most lenders offer a plan where if you make regular payments for ten to twelve months, they will consider offering you a new loan on a different vehicle at a much lower rate. This program is designed to both reward the customer with their payment history as well as help to re-establish their credit over another three to four years.