Getting approved for financing following a bankruptcy is not easy. Because a bankruptcy can reduce your credit score by 100 points, re-establishing credit is essential. On the contrary, lenders are not very eager to extend a new line of credit to persons with bad credit. Furthermore, getting a good rate on a home or car loan is nearly impossible. Since auto dealers have special programs for bad credit applicants, getting a car loan after bankruptcy is doable. Here are five ways to improve your chances of getting approved.
Apply for Car Loan Six Months after Bankruptcy
Applying for a car loan immediately following a discharge is unwise, especially if the auto loan was included in the bankruptcy. Besides, the majority of auto loan lenders will not approved the request so early. If your loan request is approved, the lender can charge an interest rate up to 22%.
When possible, hold off on financing a new or used car. Instead, wait at least six months. During this time, apply for a secured credit card and make timely payment. This will improve your credit score, and qualify you for better rates.
Save Enough Money for a Down Payment
If you can't wait six months before financing a new or used car, make an effort to save money for a down payment. A down payment reduces the total amount financed. Even with an outrageous interest rate, a down payment will contribute to lower monthly payments.
Using a Co-Borrower When Applying for Auto Loan
Piggybacking is one way to get approved for a low rate auto loan after bankruptcy. To benefit, the co-borrower or co-signer must have an excellent credit rating. Some auto loan lenders use the highest credit score on an application to determine interest rates. If your co-borrower qualifies for a low prime rate, you benefit.
Fix Your Credit, and then Apply for Car Loan
If you can’t find a co-borrower, and don't want to pay a high interest rate, be determined to fix your credit. Immediately following the discharge, apply for new lines of credit. This could include a secured credit card, gas card, store charge account, etc. Make on-time payments and keep the balances low.
Take Advantage of Sub Prime Auto Loan Lenders
