Obtaining a car loan is not out of reach for those that have had their homes foreclosed on. In fact, it may be easier to get one than you think.
The Great Recession isn’t over and times are still financially tough on many Americans as they are continuing to lose their jobs, homes, and cars. What proves to be even harder is the fact that after they lose these things they have to wrestle with the idea that they will need to apply for post-foreclosure car loans in the near future. Unless you live in a city like New York or California where there is viable public transportation, you will need a car to get to and from work and school.
You’re probably nervous thinking about obtaining another form of financing after your home foreclosure and worried that it, too, will become a financial burden, but it doesn’t have to. Yes, it’s true that a foreclosure, bankruptcy, or any other black mark on your credit report will cause your score to drop drastically and make for higher interest rates, there are things you can do to help ease those costs.
Affordable Post-Foreclosure Car Loans
Buying a car, whether it is new or used, isn’t a cheap purchase, and chances are you don’t have the money just laying around to buy it out-right. If that’s true for your situation, then this is when you will need to talk to a lender about auto financing, and be up-front about your credit situation. If you are honest about your home foreclosure and that you currently have poor credit scores, they will work harder to get you approved and into a vehicle from their lot.
If the loan that they draw up for you is too expensive for your budget, you have a list of options you can do to make the loan more affordable, such as:
- Make a higher down payment
- Have collateral to put against the car loan
- Get a family member or friend to cosign the loan
Having a large down payment is not ideal for anyone, but it can help you substantially in the long run. It will help lower the total cost of the car which reduces the amount you need to finance. This will help lower the interest rate you are approved for, and thus your monthly payment will be lower.
If you have a car that you already possess the title and you owe nothing on it, in some areas you can put this vehicle as collateral against your loan. The lending company wants to ensure that they are going to get the money you owe them one way or another and bad credit car buyers with a history of foreclosure pose a high risk to them. It’s been proven that if you’ve already defaulted on a loan in the past, then by putting your own investment into the loan – your own vehicle – you’re showing that you aren’t going to let that happen again.
A cosigner is a person that acts as the co-buyer on the loan with you, and has a better credit score than you do. This person will become legally responsible for repaying the debt if you can no longer afford the payments, and therefore, the lender will be more likely to approve the application.
Which Auto Lenders to Work with After Home Foreclosure
Subprime auto lenders tend to be more lenient when working with a person who has a recent foreclosed home on their credit history. In the past, foreclosures were reason enough for an immediate denial on your application, but now-a-days lenders are used to see poor credit scores. Working with a dealership that deals specifically with special finance auto loans, is going to give you your best chance at an approval.
When you submit your application it’s important to know that your lenders will base a large percentage of their decision on your debt-to-income (DTI) ratio. Keep in mind that:
- If you are still living in the foreclosed property, the lender will use that mortgage payment to calculate your DTI ratio.
- If you are not living in that residence, they will use your new rent payment to calculate your DTI ratio.
Your debt-to-income ratio allows lenders to see how much debt you have each month compared to your income, and if they believe you can tackle another debt, they will approve you.
If your credit issues have been situational, as opposed to habitual, you have a better chance at gaining a bad credit car loan after home foreclosure because the dealership will see that paying your bills late – or not at all – is not a recurring issue. Working with dealerships and finance companies that realize even good people can find themselves in unfortunate situations is the best road to take.
As We See It
Having your home foreclosed can prove to be a traumatic event in your life, but Auto Credit Express, can help ease the pain by helping you find a dealership that will give you an auto loan approval. We have a network of dealerships accepting bad credit buyers after foreclosure, bankruptcy, and repossession. They have both the tools and experience necessary to get you into the car you need at a price you can afford to pay.
Everyone has run into a financial rough patch at some point in their lifetime, but it doesn’t define who you are. As long as you are not a habitual offender, you have the income to make your payment each month and you have a down payment, cosigner, or collateral; you can be driving away in your new car tomorrow. Auto Credit Express makes the process easy for you – submit our online auto finance application, we will do the research to finding the best dealership for you to work with, and set up an appointment for you – all you have to do is go to the dealership and sign the papers!
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