For many consumers with questionable credit it may not be at the interest rate they are used to but here are some tips on how and when to apply for an car loan following a personal bankruptcy
What we know
For car buyers who have gone through some type of bankruptcy and now have generally poor credit, believe it or not this is actually a good time to apply for an auto loan instead of heading to the local BHPH car dealership.
At Auto Credit Express we know this because for more than two decades we've been helping consumers with bad credit looking for online auto loans find those dealers that can offer them their best chances for a loan approval.
Because of this experience we'd like to pass along some advice regarding when and how to finance a car post-bankruptcy.
There are two ways both types 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 element 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 any type loan will be turned down, even through a subprime 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 in credit reports right away).
A discharge also means this is the right time for that person to begin reestablishing their auto credit.
Car credit repair
Unless an auto loan and/or credit card debt was reaffirmed and was not included in the bankruptcy, both types of credit they represent – installment credit and revolving credit – will need to be reestablished following its completion.
The best example of a revolving credit is a credit card account. If a consumer is unable to qualify for a regular one, he or she should apply for a secured credit card where the credit limit is determined by the deposit balance in a savings account that's tied-in with the card.
Given a choice, choose the card from the lender that will allow you to convert it to a regular credit card 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 an auto loan. Even if you've just completed a bankruptcy, try to avoid financing a car from a small BHPH car lot. Most of these dealers don't report loans or payments to the credit bureaus, meaning these consumers will probably find themselves in the same credit situation the next time they need a car loan.
At the same time, it's often hard locating a franchised new car dealer that has trained staff and is signed up with the type of higher-risk lenders willing to work with credit-challenged customers who have just emerged from bankruptcy.
So what should car buyers do under these circumstances?
How we can help
We want consumers that have recently successfully completed a bankruptcy to know that Auto Credit Express specializes in helping applicants with car credit issues – including personal bankruptcy - find those dealers that can give them their best chances for approved auto loans.
So if you're ready to reestablish your auto credit, you can begin now by filling out our online auto loan application.