Few life experiences are as devastating to one’s pride and sense of well-being as having to declare bankruptcy. Add the need for a car, and life can look pretty bleak. However, if you find yourself in these dire circumstances, take heart: help is available.
In cases where more is owed on a vehicle than it’s worth, it will probably be taken by the trustees as part of the bankruptcy procedure. On the other hand, if you have been able to keep your car but need to sell or trade it, arm yourself with as much information as is available: know how much it’s worth as a trade as opposed to its price to a private buyer, for example. Kelly’s Blue Book is the standard reference point, but there are other publications and many sites on the Internet with similar information. Generally speaking, you’ll come out ahead if you sell your car on your own, then use the cash as a down payment on a different car. This is not to intimate that you can take the proceeds from your ten-year-old Chevy and sign up for a new BMW, but you can find a reasonably priced used vehicle and, with enough down, you’ll be able to keep your monthly payments within acceptable limits.
If bankruptcy is the only negative item on your credit rating, you might be able to get bank financing. In other words, if your credit was in good shape, all your bills and credit card payments made on time and you showed all indications of being a trustworthy and upright citizen, a bank could conceivably give you a bankruptcy car loan secured by the vehicle. They will expect a hefty down payment, scrutinize your ability to pay off the after bankruptcy car loan in a timely manner and will charge a considerably higher interest than you were paying pre-bankruptcy. Nevertheless, if you can make a bank deal, you’ll be better served than if you go to a loan shark or shady finance company. And, contrary to common belief, a bank will not put a lien on your firstborn child.
In many cases, it may be easier to obtain a car from a dealer. Needless to say, there are many unscrupulous dealers who will try to take advantage of your plight by both overpricing their vehicles and charging as much interest as the law allows (and more, if they can get away with it). But in these days of vanishing dealerships and failing businesses in general, it is a buyer’s market and rules are often loosened in the interest of making a sale.
Even at the most trustworthy dealership, however, you can expect to pay at least eight percent more interest than customers with good credit ratings. As an example, a buyer with an excellent credit score might pay anything from zero to eight percent a year, while one with a bankruptcy can be charged up to 20%, depending on state laws. The good news is these payments won’t last for a long time. The bad news is these payments won’t last for a long time. Whereas you might have been able to finance a car over six years when your credit was on the high side, now three years is generally the longest term you will be allowed. This means you should examine your budget closely before making a deal. Keep in mind that if you decide on a $15,000 car, to be paid over three years at 15%, you’ll be shelling out $500 a month on just your car note. Factor in insurance and upkeep and you’re looking at a sizable chunk of income for transportation. It would be wiser to lower your sights, find a good vehicle for under $10,000 and keep your payments manageable.
A third option is the “second chance” lender. These are institutions that specialize in high risk borrowers, and can be very helpful in negotiating an car loan with bankruptcy. These are the same places that advertise “payday” loans and unsecured personal loans. Needless to say, their rates are markedly higher than banks or car dealerships, but they will work with you on the most comfortable repayment schedule. Often, they will arrange collections that coincide with your paydays, on a weekly or bi-monthly basis.
In brief, the three most important things to do when you’re in the market for a vehicle are shop, shop and shop. If you had a good relationship with a bank before your bankruptcy, see what they can do for you. If that doesn’t work, check with reliable dealerships for pre-owned vehicles, keeping your budgetary limits in mind at all times. Finally, search the Internet. There are literally hundreds of sites that offer help and can solve your problems with a few keystrokes. Fill out their applications, compare the results, and do background checks on the lenders. With a little research and a bit of patience, you’ll get a car loan after bankruptcy, and you’ll be back on the road to solvency before you know it.
- Car Loan After Bankruptcy
- What is the Average Interest Rate on a Car Loan?
- Bankruptcy Auto Loans
- How to Get a Auto Loan?
- How to Get a Car Loan?
