| A car loan after a bankruptcy is
one way to help build back your credit history. In
fact, once your bankruptcy closes, you can apply for
a car loan the next day. To get approved with the
best rates for your car loan, follow these tips.
Review Your Credit Report
Before you start applying for a car loan, check out
your credit report and make sure all your accounts
are in order. It is not uncommon after a bankruptcy
to see open accounts that should be closed, which
hurt your credit rating.
While looking at your credit report, consider adding
a page explaining the situation that resulted in your
bankruptcy. If there were extenuating circumstances,
lenders may approve you for a better rate than under
normal conditions.
Plan Your Car Purchase
Before purchasing a vehicle, decide what you can afford
in a monthly car loan payment. This will help you
decide which financing package is best for you. Both
the loan amount and length of payments will determine
your monthly payments, so there is flexibility in
determining which vehicle you can afford to purchase.
Use A Car Loan Lender
Car loan lenders make their money by finding you a
loan. Car loan lenders work with several financing
partners to back loans with all types of credit risk,
including bankruptcies.
Online car loan lenders deal with thousands of loans,
and can usually find you a better deal than your local
car dealerships. Online car loan lenders will send
you a check when you are approved, basically making
you a pre-approved car loan buyer.
Explain Your Situation
Car loan applications will ask if you have ever declared
bankruptcy and why. This is your chance to explain
what led up to the situation and what steps you have
taken to resolve your credit situation. Be sure to
include improvements in your financial history too.
Consider Refinancing
Once you are approved for a car loan, keep your eye
on future refinancing. By making regular payments
on all your bills, in a year’s time you could
qualify for significantly lower interest rates. In
three years, you can build your credit score to near
excellent and qualify for even lower rates.
Since the new bankruptcy law took effect on October
17, 2005 fewer Americans can file for a chapter 7
bankruptcy and many more are forced to file a chapter
13. In either case you may qualify for an auto loan.
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