If your vehicle was repossessed, you can typically get another car loan after a year has passed with most lenders. There are steps you should take before you apply for your next auto loan, and the longer you can wait, the better. Here’s how to make the most of your repo situation.
Getting an Auto Loan after Repossession
To have your best chance at getting a car loan after repossession, you need to go to the right kind of lender. Traditional lenders usually won't approve borrowers with a repossession on their credit reports. Subprime lenders, on the other hand, specialize in helping borrowers dealing with less than perfect credit situations.
A repossession drops your credit score and stays on your credit reports for up to seven years, but the effect it has on your credit score lessens over time. Since a repo reduces your chances of getting approved for an auto loan, it’s important to take as much time as possible to turn your credit around following one.
Generally, you’re able to apply for a car loan with a subprime lender a year after a repossession. If you’ve had multiple repos, it could take even longer. However, since you can’t always wait to get another vehicle, you may be able to get an auto loan right away by visiting a buy here pay here (BHPH) dealership.
These places are in-house financing dealers, which means they sell you the car and finance it, too. It usually won't matter that you have a prior repossession, as these places generally don't check your credit. All you typically need to get approved is a qualifying income. Be prepared, though, as these dealerships usually charge high interest rates and require a down payment.
Preparing for a Bad Credit Auto Loan
Since you’re likely to get the best deal through a subprime lender after a repo, you need to prepare for a bad credit auto loan. If this type of loan isn’t something you’ve dealt with in the past, know that getting a bad credit car loan with one of these lenders has more steps and requirements involved than getting an auto loan with good credit, or going through a BHPH dealer.
The first step is to get a copy of your credit reports, and find out your credit score. You can visit www.annualcreditreport.com to get a free copy of your credit reports. Thanks to the Fair Credit Reporting Act, you’re allowed a free copy of your credit reports every 12 months from each of the three national credit bureaus: TransUnion, Experian, and Equifax.
Getting your credit score at the same time may result in a fee, or you can check with your bank, credit union, or credit card company to see if they offer free access to your credit score. You can also get your credit score through a credit monitoring service, which allows you to regularly stay on top of any changes in your credit throughout the year.
Once you know your credit situation, you can move on to other preparations that need to be made for getting a car loan with bad credit. As we said, there are many requirements involved. Though the specific details vary by lender, you generally need documentation proving your income, employment, residency, and that you have a working phone.
Besides these factors, you’re typically asked to provide a list of five to eight personal references, as well as a down payment. When it comes to getting an auto loan after repossession, the bigger the down payment you can come up with, the better.
Usually, subprime lenders ask borrowers to provide at least $1,000 or 10% of the vehicle’s selling price, whichever is less. However, a larger down payment goes a long way toward showing a lender that you’re serious about successfully completing this loan.
Auto Credit Express Tip: One thing that may help secure you a car loan after a repo is having a cosigner or a co-borrower on hand.
Start Your Second-Chance Auto Loan on the Right Foot
Now that you know you have to wait to get an auto loan after a repossession, it’s a great time to begin building your credit and preparing for the bad credit car loan process. Once you think your credit’s improved and enough time has passed, you’re going to need to find the right lender for the job.
This is where Auto Credit Express comes in. We’ve helped hundreds of thousands of people get connected to the right dealerships for the job over the past 20-plus years, and now we want to help you.
To get started, simply fill out our no-obligation auto loan request form, and we’ll get to work finding a dealer in your area that has the lending resources you need.