Consumer Car Buying Advice Blog

It probably will not be at the interest rates you are used to but this will help explain how and when to apply for an car loan with a personal bankruptcy

Our experience

For those consumers who have had to file for some type of bankruptcy we offer some tips on why, for the most part, this is a good time to apply for a bad credit auto loan instead of heading down the street to the local BHPH car lot.

At Auto Credit Express, where we’ve been helping credit-challenged car buyers for over twenty years, we have some answers for consumers with bankruptcy-related questions. We also have some advice for the best way these folks can locate a franchised new car dealer that can offer them their best opportunity for approved auto loans.

Bankruptcy

There are exactly two ways either type of personal bankruptcy – a Chapter 7 or a Chapter 13 – can be completed. They can either be dismissed or discharged.

If a bankruptcy is dismissed – something more common during a Chapter 13 due to the time duration involved – it’s usually a sign that the court-ordered payment schedule set up for the filer has not been followed. In most cases if a dismissal appears on a credit report, an application for a loan will be turned down, even if it’s with a high-risk auto lender.

If the bankruptcy has been discharged, this means the bankruptcy process has been completed successfully. When this occurs, the bankruptcy court will issue a letter of discharge. Once this document is received, it should be saved, since it may be needed as proof that the bankruptcy has been completed (there is often a delay in reporting a discharge to the credit bureaus so it may not show up on credit reports right away).

A bankruptcy discharge also means it’s the right time for that individual to begin reestablishing their car credit.

Auto credit repair

Unless an auto loan and/or credit card debt was reaffirmed as not being part of the bankruptcy, both types of credit they represent – installment credit and revolving credit – will need to be reestablished following the discharge.

The best example of a revolving credit account is a credit card. If you’re unable to qualify for a regular one, you should apply for a secured credit card where the credit limit is determined by the balance you deposit in a savings account that’s tied-in with the card you signed up for.

If you’re given the choice, pick the one from the lender that will allow you to convert it to a regular credit card account after 12-18 months of regular payments. In the mean time, be sure to maintain a credit balance of 30% or less of your credit line.

The most common example of the other type of credit account, installment credit, is a car loan. Even if you’ve just emerged from a bankruptcy, try to avoid financing a car from a small neighborhood buy here pay here car lot. Most of these BHPH dealers don’t report loans to the credit bureaus, meaning you could find yourself in the same credit situation the next time you need a vehicle.

At the same time, it can often be difficult finding a franchised new car dealer in your area that has the staff and is signed up with the type of higher-risk lenders willing to work with credit-challenged customers who have just completed a bankruptcy.

So what should you do under these circumstances to try and find a dealership that can help your credit repair efforts?

Check us out

If you have recently successfully completed a bankruptcy, we want you to know that for over 20 years Auto Credit Express has been helping people with less than perfect credit find dealers that can get arrange for approved auto loans. These loans require a credit check but, once approved, each month you’ll be taking one more step towards raising your credit scores and rebuilding your credit.

Once you’ve decided you’re ready, you can start the process by filling out our online auto loans application.

Tags: Bad Credit, bankruptcy

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