How Long After Bankruptcy Can I Get a Car Loan?
Getting a car loan can be a daunting task, especially if you don’t know where to start. Fortunately, there are plenty of auto lenders and financial institutions who are willing to provide car loans. It is important to do your research and compare different lenders so that you can find the best offer for your needs.
Understanding the loan terms and conditions is essential to avoid any unexpected costs or fees.
How Long After Bankruptcy Can You Apply for a Car Loan?
Will you be able to get a loan after bankruptcy? Well, chances are slim, but it is still possible. How long does it take to get an auto loan after bankruptcy?
Before applying for a car or personal loan, you should keep in mind that after filing, bankruptcy shows up on credit reports for 7 and 10 years. Don’t despair, there are still lenders prepared to cooperate with those who have bankruptcy listed on their credit records. However, be ready for higher interest rates.
Let’s face it, the majority of lenders will not consider your loan application if your bankruptcy is still active. So, maybe the best option is to wait until it gets resolved, especially if you want a lower interest rate. Take advantage of that time to improve your credit score.
Filing for Chapter 7 is the best solution for most individuals and organizations that are forced into bankruptcy. That’s because Chapter 7 bankruptcy is generally discharged 4 to 6 months after filing.
Even after your bankruptcy has been discharged, you will probably have to wait before applying for a car loan. The same goes for personal loans.
Some applicants have to wait 2 years before they apply for a loan. Some lenders only accept candidates whose bankruptcy cases were successfully settled at least 12 months ago.
Bankruptcy Car Loan: Chapter 13 vs. Chapter 7
Chapter 7 and Chapter 13 are the most common types of bankruptcies. Which one is a more favorable option for people looking to get a loan?
Applying for an Auto Loan After Chapter 13 Bankruptcy
This type of bankruptcy is meant to enable consumers to repay their outstanding debts. It implies a repayment plan which ensures that debt collectors don’t pursue further methods of debt collection.
After creating a plan, you will be able to pay off part or all of the debt within 3-5 years. If you choose this plan, you will be required to regularly pay a fixed amount of money to your trustee – usually as monthly payments or every two weeks.
Remember that the bankruptcy will stay on your credit report for a maximum of seven years from the filing date. Still, you’ll be able to buy a new car during this period if the judge permits you. Court permission is not required to finance a car after the procedure is complete.
Applying for an Auto Loan After Chapter 7 Bankruptcy
With this kind of bankruptcy, certain debts can be discharged while some possessions and assets may be liquidated to help get out of debt. A bankruptcy trustee is competent to sell almost any asset during the proceedings, including your vehicles.
If you want to buy a new car, it is a good idea to wait for your bankruptcy to be finalized. As mentioned above, it usually takes from 4 to 6 months. Acquiring assets or buying a car beforehand often indicates fraud.
Sometimes it can take only 90 days to complete. However, it can be visible on your credit report for ten years after filing.
Tips for Getting an Auto Loan After Declared Bankruptcy
As a general rule of thumb, those who wait longer and work on building a credit history are more likely to get approved. What’s more, they have a better chance of getting a car loan with a lower interest rate.
A good credit score isn’t the only decisive factor when it comes to approvals. That’s why it is important to have a stellar financial history to avoid double-digit rates. Here are a few tips on how to get the best car loan after filing for bankruptcy:
- Set your budget and make the largest possible down payment savings.
- Check your credit for errors on the credit report.
- Rebuild your credit before applying for a loan if you can wait to purchase a car.
- Compare different cars after identifying your price range to find ones that fit your lifestyle and budget.
- Get pre-approved after shopping around for lenders to find the best deal.
Are you ready to buy? Be sure to compare a lot of local lenders to find the best auto loan offer before signing the paperwork. Check loan terms and rates from different loan lenders near you and make them familiar with your financial situation.
Check with your credit union or bank when searching for lenders to see whether they provide bad credit auto loans. Get pre-approved for a loan and apply to numerous lenders before heading to your dealer.
That will help you get a better idea of loan terms, interest rates, and limits before you have to deal with a salesperson. It’s worth noting that pre-approvals are just conditional offers and they don’t guarantee that you will eventually get approved.
The Bottom Line
While getting an auto loan after bankruptcy seems impossible, with careful planning and examination, it doesn’t have to be difficult. Try to save for a down payment and rebuild your credit to boost your odds of getting approved.
Besides considering lenders, you should also reach out to a credit union in your place. Local credit unions offer options that may help you rehabilitate your finances. They are often flexible in addressing post-bankruptcy problems. Nevertheless, not every credit union wants to do business with people in case their bankruptcy discharge involves any debt owed to them.
A good bankruptcy attorney will provide advice, guidance, and support to those in need of debt relief. We can help you understand your rights and obligations under the law, negotiate with creditors on your behalf, and develop a plan of action that will help you get back on track financially.
