Repossessed vehicles on your credit report can make a new lender feel uneasy about the transaction, but believe it or not, you can get approved for a car loan after repossession.
It may feel like your world is ending when your beloved car – that you couldn't afford – is driven off on the back of a flatbed truck, but we promise it's not. Repossession is a large step backward in your financial life, but it won't stop you from moving forward again. Lenders have been loosening the reins on car loan requirements in the past few years and are now willing to look at borrowers with problem credit.
A vehicle repo can greatly lower your credit score and leave you in the subprime category, meaning your score is 620 or lower, but luckily there are subprime lenders that will work with you. Here at Auto Credit Express, we can help you find a dealership in your area that won't turn away as soon as you mention you have had a recent repossession. Instead they will work out a deal that fits into your budget, but there are a few things you can do to help yourself.
Determine Where Your Credit Stands and Repair it
So, you know your credit score is going to be low because of your repo, but it may or may not be as bad as you think. The first thing you should always do when you're looking for a car loan – regardless of your credit history – is obtain a copy of your credit report and your credit score. This is easy to do online and is free from all three credit bureaus once every 12 months.
Auto loans can be a complicated process and getting approved shouldn't be your only concern. You want to get favorable terms on the loan as well so you can afford your payment and not end up with a second repossession on your history. This is all determined by what your credit report says to the lender. For example, bad credit can be caused by one or more of the following:
- Slow pay
- Defaults on loans
- Collection notices
Anyone with these on their reports will be subject to higher interest rate because they pose a higher risk to the lender. Anyone with a credit score above 620 will be subject to lower interest rates because they are less of a risk. If you want to be less of a risk, even with a bad credit auto loan with repossession, you will need to repair some old debt first.
If you are currently behind on a few monthly payments then you will need to bring those payments current. This shows lenders that you are making an honest effort to make good with your creditors. Remember, rebuilding your credit is not an easy or fast process. It takes time, commitment, and discipline to stay on top of all your bills, but it will be worth it in the end when you receive a low interest rate when you are buying a car on credit.
Be Prepared When You Visit the Dealer
If you're in the middle of paying off past over-due debts and repairing your credit, the chances that you have extra money lying around are slim. However, if you can spare some extra cash each week, you should. Having a down payment is generally a requirement of anyone with less than perfect credit looking to get approved for an auto loan — and the bigger the better. Having a down payment tells lenders that you have control over your finances, which in turn, means that they are more apt to approve your application.
If you don't have the cash lying around, you can trade-in your old car at the dealership and use whatever equity you have in the vehicle as a down payment. Unfortunately, this doesn't come out to much usually and doesn't equal the 20 percent many dealers like to see. If you have the means to save up and get a large down payment, we suggest doing so. If you don't, however, Auto Credit Express can still help you get approved.
After you have figured out your money situation and what you are going to do about the down payment you should find out exactly what you need to bring to the dealership. Most dealers require you to bring:
- A valid driver's license
- A month's worth of pay stubs
- Last year's federal income taxes
- Possibly a utility bill to verify your residence
You should always ask which documents are needed to complete the auto financing process that same day, and have them with you when you talk to the finance manager. It will make the process go by quicker and smoother and will allow the lender to see that you are organized and serious about making a purchase.
When you're talking to the finance manager keep in mind that they will be checking that everything you say is accurate, so it's best to be completely honest. Don't lie to them about having your last car repossessed, or how long ago it was, because they are able to see that information and will most likely think twice about lending to someone who lied to them.
Set Your Goals Realistically
You probably got a cold, hard slap in the face by the reality stick when you saw your car being hauled away, and that's a good thing. You've already been down the road with a car you couldn't afford the payments on, so let's not do that again. Instead, you should come to terms with the fact that the car you can afford is not going to be the coolest, newest, or fastest thing on the road.
Only look at cars that fit in your budget, and choose one based on the features it has. I mean, do you really need heated and cooled seats, cooling cup holders or a moon roof? I don't think so. Stick to what you absolutely need for right now, and then once you have made your payments on time and your credit scores have improved, then maybe you can opt for a fully-loaded new car the next time around.
As We See It
Repossession isn't the end of the world; it's merely a bump in the road. You don't have to give up all hope of ever owning a car again, because we can help you. We work with a large network of special financing car dealerships that have the tools and experience needed to get you into another vehicle that you can afford; ultimately helping you rebuild your credit scores.
At Auto Credit Express we've been helping bad credit car buyers get the auto financing they desperately need quickly for over twenty years. So regardless of whether your repossession was 10 years ago, 5 years ago or 1 year ago; you can be driving home in a new-to-you car by tomorrow! To get started today apply online here.