After bankruptcy can I get a cheap car?
If you have filed bankruptcy the good news is there are millions of other Americans just like you, and lenders willing to giving loans to individuals with a variety of financial issues. Experts suggest, however, the key to finding the right car loan is to shop around.
How do I get a car loan after bankruptcy?
If you want to purchase a car after bankruptcy the easiest way would be to save and pay for the car with cash. If that is not possible, however, you will need to find a lender who will loan you money for your car purchase.
Experts suggest the first place to start looking for a car loan may be with a local credit union. Unlike a large national bank, the credit union may serve the local community and be more understanding of any unexpected crisis in your town, such as a factory closing, which may have forced you into bankruptcy.
If a lender is willing to loan you money to buy a car, however, the amount they will loan could be limited, and the interest rate could be high. For example, do not expect to purchase a Jaguar or Mercedes. The amount you could borrow would most likely be under $20,000.
Also, expect to pay a much higher interest rate for your loan than someone with stellar credit. The increased interest rate is to compensate the lender for the increased risk of loaning you money. For example, someone with a 720 credit score may receive 3.80 APR for a 36-month car loan. If your credit score is around 500 your interest rate could be as high as 17.02 APR.
Finally, shop with care. It is not unusual for some lenders to prey on those who have credit problems. In fact, some dealers, who offer to sell cars with no credit check and no money down, may simply be trying to lure uneducated consumers to their dealerships and ultimately only offer loans with a high interest rate and lengthy repayment schedule.
What if I have not completed my bankruptcy?
If you have filed Chapter 7 bankruptcy your debts could be discharged immediately, and you might be able to save some money and purchase a car soon after the completion. Chapter 13 bankruptcy, however, could take up to five years to complete.
If you need a car while you are still making payments on your Chapter 13 bankruptcy repayment plan you will have to get approval from the trustee to make the car purchase. The bankruptcy trustee must approve auto loans or other new debt a consumer wants to take on while in the midst of the bankruptcy proceedings.
Talk to your trustee for information about getting permission to incur new debt. The procedures can vary, but the court will generally require information about the loan's terms (the length of the loan, interest rate, and monthly payments) from your dealership and information about how the new debt will impact your ability to distribute money to existing creditors.
The court may also require a motion requesting permission from the court, and you may have to attend a hearing. If the motion is approved, the court order will be given to you, and you can submit this order to the lender for the new loan.
Bankruptcy is not wrong for those who have made an honest effort to pay creditors.