Getting your car repossessed is no picnic. Repossession has a big negative impact on your credit score and the repo itself stays on your credit reports for seven years, but the effects lessen over time. Once enough time has passed, it's possible to get an auto loan after repossession – as long as you're working with the right type of lender.
Requirements for Getting a Car Loan after Repossession
The time it can take to qualify for a car loan after repossession varies depending on the lender, but you typically have to wait at least a year before you can apply for financing. This is because lenders are worried that you're going to default on a loan again, and repossession is just as expensive for a lender as it is for you.
Once a lender repossesses a vehicle, they typically sell it at auction to recover as much value as they can. If they're unable to sell the car for the amount you owe them, you're required by law to pay off the difference, which is known as a deficiency balance. The sooner you pay off the deficiency, the better. Paying off this balance can also raise your credit score.
Improve Your Chances of Getting a Car Loan after Repossession
Besides being costly and hard on your credit, repossession can reduce the pool of lenders willing to work with your situation. For this reason, your best chance at getting an auto loan after a repo is going to come from a subprime lender.
Subprime lenders look beyond your credit score to get you financed based on your income, employment, and residence stability. These lenders specialize in working with people in unique credit situations, including repossession, bankruptcy, and bad credit.
Even though these lenders are more willing and able to work with someone in your position, there are a few things you can do to help make the process easier on yourself:
- Repair your credit while you wait – Since you probably have to wait a year after a repossession to apply for a loan again, you can use this time to improve your credit. To do this, get your credit score and reports and check them for accuracy. Removing any inaccurate entries can raise your score. You can also see where you need to improve, and work on those areas: pay off any past due accounts, begin making all payments on time, and reduce your credit card balances.
- Save for a down payment – A good way to increase your approval odds is to finance as little as possible for the shortest term you can. One way to accomplish this is with a large down payment. The bigger your down payment, the less you have to borrow. Lower loan amounts can lead to reduced interest charges, shorter loan terms, lower monthly payments, and less time with negative equity.
- Stay within your means – After a repo, it's not the time to finance your dream car. Making a reasonably priced vehicle choice that has a monthly payment you can afford is a great start for buying a car after repossession.
- Work with the right lender – Not every lender can work with repossession, and the lenders that can only work through special finance dealerships. These dealers don't always shout about their special financing departments from the rooftops, so it's important that you know where to look ahead of time.
Let Us Help
When you don't know where to turn for the lenders you need, there's a potential for running all over town to no avail. It can be stressful and frustrating driving in circles not knowing which dealership has the resources you need. But, when you work with Auto Credit Express, you don't need to deal with that kind of stress.
We work with a nationwide network of special finance dealers that have subprime lenders available. Rather than driving from one end of the city to the other looking for the right dealership, just fill out our auto loan request form. Once you do, we get to work matching you to a dealer in your area that has the lenders available to help people in unique credit situations. What are you waiting for? Get started right now!
