Driving Away From Your Bankruptcy With A New Car Loan

One thing is for certain, bankruptcy is a brutal beast when it comes to your credit file. But getting a car loan after bankruptcy is one of the best ways to begin the rebuilding process to regain your borrowing reputation and qualify for other loans. In fact, once your bankruptcy has been discharged, you can pretty much apply almost immediately for a car loan. Let us take a look at what you can do to get the best rates on your post bankruptcy car loan.

Checking Your Credit Report And Score

Before you run to the car dealership, you should always check your credit report to make certain that all of your accounts are noted as discharged in bankruptcy. Oftentimes, your credit report following bankruptcy will still show open accounts when they should be noted as closed and discharged, which does harm to your credit rating. And since different car dealerships use different credit bureaus when they inquire about your credit, be certain that you contact all three major credit reporting bureaus to determine the accuracy of your credit file (Experian, Trans Union, and Equifax).

If your bankruptcy and accounts are not noted accurately, contact the bureau in question immediately to request that they update your record. In addition, you should add a page onto your credit file that explains why you ended up in bankruptcy in the first place so that potential creditors get a better picture of your circumstances when filing. This is especially true if extenuating circumstances forced you to file bankruptcy, such as job loss, accident, illness, injury, and other reasons that led to your particular situation.

Making A Budget For Your Car Purchase

That being done, you should also make out a reasonable budget for the vehicle that you wish to purchase, and determine how much you can truly afford to pay each month by way of a car payment. Keep in mind that the length of the loan and the amount of the loan will be big determinants in your payment amount, so decide before going to the dealership how long you want to pay for your car and how much you can afford to pay.

Choosing A Lender

In addition, you should determine who will finance your car loan. There are options such as dealer financing, banks, finance companies, or even online car loan servicers. Research which of these can give you the best deal, and do not feel pressured to go with dealer financing either. Oftentimes, dealerships are given great incentives for sending loan applications through to larger finance companies. By going to the finance company yourself, you cut out the middle man, which can only save you money.

Refinance As Soon As Possible

Your car loan following bankruptcy discharge will undoubtedly be written at a much higher rate than a normal borrower would pay. For this reason, it is important that after a year or so of good payment history, you attempt to arrange to refinance your car loan. This can save you literally thousands of dollars over the life of your loan, and lenders will often refinance your loan when you have demonstrated responsible payment behavior.