Need Help Finding A Car Dealership
No matter where youre at in the bankruptcy process, The Car Connection can help you find a local dealer that can help you get financed. With our auto loan request form, and nationwide network of dealerships that know how to handle unique credit situations such as bankruptcy, we want to connect you to a local dealer that can help you get financed. Get started right now to get the bankruptcy car loan you need!
Obtaining A Car Loan With Anopen Bankruptcy
An open bankruptcy simply means that your bankruptcy has not yet been discharged and you are still going through the bankruptcy process. Chapter 7 and Chapter 13 bankruptcy are the most common forms of bankruptcy. You can indeed get a car loan offer after bankruptcy filing, but in most cases, it may be more difficult. However, one important difference between the Chapter 7 type of bankruptcy and Chapter 13 type of bankruptcy as it relates to getting a car loan is that you may find that an older filing of a Chapter 7 may make it more challenging to obtain financing.
No matter who would be giving you the car loan, dealerships may hesitate to give someone with an open bankruptcy a car loan, but lenders might consider your car loan application after your 341 meeting. A 341 meeting is a part of Chapter 7 bankruptcy, where you, your bankruptcy attorney, and the bankruptcy trustee meet to make sure all your bankruptcy paperwork is in order. 341 meetings are also held to ensure you are not trying to commit bankruptcy fraud and to confirm your personal assets that can be sold to pay back your creditors.
Some dealerships do have programs for you to start rebuilding your bad credit score via a car loan. If you get a car loan while you have an open bankruptcy, it is likely that the car loan will be expensive and will include interest rates that are higher than usual.
Getting A Car Loan After Bankruptcy
It can be difficult to build your credit back up following a setback like this, but getting a car loan after bankruptcy is possible. A bankruptcy car loan is a good way to help your credit recover once you’ve received a discharge from a Chapter 7 or Chapter 13. The process of getting a car loan following a discharged bankruptcy is fairly simple.
Like with any other bad credit auto financing, you need to meet the lender’s requirements to qualify. Besides meeting the income, employment, and residency requirements most lenders look for, there are a few tips to keep in mind:
- Check your credit – Make sure you check that the discharge shows up on your credit reports, check for overall accuracy, and view your credit score to see where you stand before visiting a dealership.
- Amount matters – The less money you borrow, the easier it should be for you to get approved. A good way to keep costs low is to finance a used vehicle. Keep in mind that you’ll need a reliable vehicle, not just an affordable one.
- Prepare a down payment – The bigger your down payment, the less you have to borrow. Subprime lenders typically ask for $1,000 down or 10 percent of the vehicle’s selling price, whichever is less.
- Cosigners can be a big help – In fact, lenders sometimes require bad credit borrowers to have one. But, before you ask a friend or family member to put their credit on the line, be sure you both know what this means.
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Ready To Find A Dealer
Dealing with bankruptcy is tough, and it isnt easy finding a lender that can work with you if you have one on your credit reports and your credit score has dropped.
If you need help finding a dealership that can work with your bankruptcy, look no further. CarsDirect is teamed up with dealers all across the country that specialize in getting people with less than perfect credit financed. Fill out our car loan request form today, and we’ll get right to work connecting you to a local dealership.
Find A Lender That Will Work With Chapter 13 Bankruptcies
There are few lenders and car dealers who will work with those in an active bankruptcy, but there certainly are some who will, explains Lins. Your bankruptcy attorney may be able to provide a list of lenders and dealers that will work with you, and you should check with your local credit union or bank. And because your credit score will take a hit from bankruptcy, expect higher interest rates, fees and less favorable terms.
Youll also need to find a dealer who works with subprime lenders to get the car financed. Despite your options being slim, do your due diligence and compare rates and terms from a few different lenders.
You must have the offer, including the purchase price, monthly payment and interest rate, in writing to provide to the court, explains Lins. Keep the purchase price as low as possible and wait to exit bankruptcy and rehabilitate your credit before purchasing a more expensive vehicle, she says.
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How Soon After Bankruptcy Can You Buy A Car
You can submit a finance application for a car loan as soon as the bankruptcy court discharges your case. While its true that your chances of approval improve over time, sometimes you cant wait to acquire a car.
Lenders that specialize in subprime loans understand that applicants may need a vehicle for work and other essential duties.
This attitude is robust among dealerships that offer their own financing rather than relying on a car manufacturer or outside banks. Often called buy here, pay here dealerships, these lenders are motivated to move inventory off their lots and are willing to look past high-risk credit in that pursuit. After all, they can rely on vehicle repossession if a borrower fails to pay on time.
The loans they offer usually have higher than average interest rates, which helps lenders protect themselves from borrowers who default on their loans. For many buyers, the affordability of the monthly payment trumps the overall interest cost and tougher loan terms.
Improve Your Credit Score
There are several ways to improve your credit score, including getting and responsibly using a secured credit card. Obtaining a secured credit card requires putting down a small deposit that acts as collateral. Your deposit becomes the credit line for your credit card. Charging and repaying small amounts over time will help rebuild a positive credit history, says Lins.
You can also look at services that will report rent and other bills, such as cell phone, utilities and streaming services to help you build or rebuild an on-time payment history, says Lins. These services usually charge a modest fee, but some are free, she says. Using your utility bills and rental payments to create credit history can be a good strategy to jump-start the rebuilding process.
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Consolidation & Debt Repayment Plans
Consolidation usually means consolidating your bills and everything you owe into a new loan. With a fine-tuned budget, this might work for you. For other people, consolidating only the monthly payments makes more sense. Dont worry if youve been turned down by your bank or credit union. There are other types of debt consolidation that may be available.
Consolidating payments doesnt involve borrowing more money, so theres never a problem with bad credit. Thats how a debt management program and plan with a non-profit credit counselling organization works. Creditors help by lowering or waiving interest charges while youre making your payments. This lets you pay off your debts and saves you thousands in interest and fees. What you pay each month is based on what you can afford after youve had help to create a realistic budget.
Start Building Good Credit History
Filing bankruptcy affects each persons credit differently. The more accounts included in your bankruptcy, the more severe the damage. In addition, the higher your scores before filing, the more points youll lose for example, someone with scores around 750 before bankruptcy can expect to lose 100 or more points.
The most important thing is to show lenders that youve overcome your financial difficulties. The best way to do this is by making on-time payments, starting as soon as possible.
Doing this can feel like a Catch-22: You may need new credit to build your credit scores, but you cant get approved because of bad credit. Here are some of the best ways to get around this obstacle:
- Become an authorized user. If you have a loved one with good credit, ask them to add you to one or more of their credit card accounts as an authorized user. This will cause the account information to appear on both of your credit records as if it belongs to both of you.
- Apply for a secured credit card. These credit cards are designed to help people with poor credit. Instead of qualifying with high credit scores, you qualify by making a deposit.
- Apply for a credit-builder loan. These small loans usually have high interest rates and are paid back relatively quickly they may not be as beneficial as a secured card or other long-term account, though they can still help you start improving your credit. Youre most likely to find credit-builder loans through a credit union or community bank.
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If You Have A Car Loan And Want To Keep The Car After Filing Bankruptcy Youll Have To Pay For It
Many people are under the mistaken belief that filing bankruptcy allows you to wipe out an auto loan and keep the vehicle free and clear of any payments. It just isnt true. Bankruptcy will unwind your obligation to pay back the loan. But if you dont make the payment, you wont be driving the car for long. So the short answer is noyou wont get a free car in bankruptcy.
Even so, it isnt a given that youll lose a car with a car loan, either. In this article, youll learn:
- what happens to car loans in bankruptcy
- how to keep a financed car in Chapters 7 and 13, and
- surrendering a car you want to return to the lender.
We have many more helpful articles that explain what happens to cars in bankruptcy. Look for links to additional resources at the end of this article.
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How To Get A Car Loan While In Chapter 13 Bankruptcy
If you have the cash to pay for a car, you can simply purchase a vehicle for cash without going through the court. However, you may need to amend your bankruptcy schedule, so talk to your attorney first.
If you need to get a car loan while you are still on your repayment plan and before youre discharged from bankruptcy, you can probably do so. Here are four steps to take, explains Lins.
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Finding A Legitimate Car Loan Lender
Finding a lender willing to give you a car loan is more difficult after bankruptcy. Start with your own bank, a credit union, or another bank. You should also consider checking with your bankruptcy attorneyhe or she might have a list of legitimate lenders who provide car loans to people in bankruptcy or just out of bankruptcy.
If you cannot obtain a loan through a well-known bank and don’t have recommendations from an attorney or other trusted source, be wary of companies offering car loans to people with poor credit. You can easily use online tools to see if you qualify for a car loan, but before you decide on a particular lender, be sure to thoroughly research the company.
Fraudulent advertisements do make their way into the mail and other advertising venues, and phony or unscrupulous lenders tend to prey on those who have just emerged from bankruptcy. Do not give your Social Security number to any lender until you confirm that the lender is legitimate.
If You Have A Car Loan And Want To Keep The Car After Filing Bankruptcy You’ll Have To Pay For It
Many people are under the mistaken belief that filing bankruptcy allows you to wipe out an auto loan and keep the vehicle free and clear of any payments. It just isn’t true. Bankruptcy will unwind your obligation to pay back the loan. But if you don’t make the payment, you won’t be driving the car for long. So the short answer is noyou won’t get a free car in bankruptcy.
Even so, it isn’t a given that you’ll lose a car with a car loan, either. In this article, you’ll learn:
- what happens to car loans in bankruptcy
- how to keep a financed car in Chapters 7 and 13, and
- “surrendering” a car you want to return to the lender.
We have many more helpful articles that explain what happens to cars in bankruptcy. Look for links to additional resources at the end of this article.
- Get answers to questions about bankruptcies.
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Chapter 13 Vs Chapter 7 Bankruptcy
For many lenders, credit history and credit score are the greatest indicators of one’s financial responsibility. However, they’re not the only considerations. Lenders also consider the number of accounts included in your bankruptcy. The more accounts, the greater the bankruptcy’s impact on your credit.
Individuals can file for two kinds of bankruptcy: Chapter 7 or Chapter 13. According to , your ability to get approved for a car loan is often impacted by the type of bankruptcy you filed for and the amount of time since you filed for bankruptcy.
Filing for bankruptcy usually takes several months after your initial meeting with your lawyer. With a Chapter 13 bankruptcy, your creditors reduce the amount of money you owe. You are then responsible for making a payment to the trustee who’s in charge of your case, and they, in turn, portion out payments to the various creditors.
According to Auto Credit Express, the biggest advantage of this type of bankruptcy is that you get to retain your assets and property. This type of bankruptcy usually takes five years to complete. While a Chapter 13 stays on your credit for up to seven years, you do have options if you are trying to take out an auto loan during that time.
Best Bankruptcy Auto Loans
Adam was written, edited, and managed content for news outlets and digital publications for nearly 20 years. Since specializing in finance in late 2016, his editorial focus has been on consumer financial literacy. Adam is most knowledgeable in the areas of credit scores, financial products and services, and the banking industry.
Edited by: Lillian Guevara-Castro
Lillian brings more than 30 years of editing and journalism experience, having written and edited for major news organizations, including The Atlanta Journal-Constitution and the New York Times. A former business writer and business desk editor, Lillian ensures all BadCredit.org content equips readers with financial literacy.
Bad things can happen to good people. That includes emergencies, money problems, and even bankruptcy. But that doesnt mean these momentary setbacks have to define who you are.
If youre in need of a new vehicle, but have limited loan options because of a pending or recently discharged bankruptcy, you should consider one of the best bankruptcy auto loans. The lenders below specialize in helping consumers who have bad credit or even bankruptcies get access to the funds they need.
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Bankruptcy Erases Car Loans But Not Car Liens
Bankruptcy works by breaking the contract requiring you to repay the lender for the car loan. You can file for bankruptcy, give the car back to the lender, and not pay anything further on the car loan.
However, if you want to keep a car with a car loan, there’s a catch. Filing for bankruptcy doesn’t eliminate the lien giving the bank the right to take back your car if you don’t pay as agreed. The bank can use the lien to repossess the car once the bankruptcy case is overor sooner with the court’s permissioneven though you erased the debt. So if you want to keep the car, you must pay for it.
How you pay your car loanand whether you can keep a car if you’re behind on the car loanwill depend on whether you file for Chapter 7 or 13.
Buying a car is costly, and most people can’t afford to pay for one outright. Instead, borrowers finance the purchase by signing a “promissory note” agreeing to pay back the debt with interest in monthly installments.
Because most car loans involve thousands of dollars, banks minimize risk by requiring the buyer to agree to put up the vehicle as collateral. The additional requirement creates a lien on the car that lets the lender repossess the car if the borrower “defaults” by failing to pay.
In bankruptcy, the lien makes the car loan a “secured debt,” unlike a Visa or Mastercard balance, which would be an “unsecured debt.”
Be Careful With Second Chance Lenders
Once you start shopping for a car, you will likely find dealers who are all too happy to sell a car to someone who has gone through a bankruptcy. It is important to be cautious and pay close attention to the details of any auto loans after Chapter 7 offered by so called second chance lenders. Some car dealers offer in-house financing. They will often use low monthly payments to mask high interest rates and long loan terms. If the length of your loan is going to exceed the life of the vehicle, you should probably shop somewhere else. If you are buying a used car, make sure you know its full history. Some sellers will buy worn out high mileage vehicles at auction, give them an exterior clean up, and then attempt to unload them at a profit to unsuspecting buyers. Take the time to shop around and compare offers.
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