Auto Loans After Bankruptcy - Does Bankruptcy Affect Your Approval

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Auto Loans After Bankruptcy - Does Bankruptcy Affect Your Approval
A recent bankruptcy will not disqualify you from obtaining an auto loan. In fact, opening a new line of credit shortly after a bankruptcy helps re-establish your credit and improve your credit history. Bankruptcy allows a fresh start. Initially, lenders may be hesitant to lend you money. However, after you have established a good payment history with new creditors, other creditors will take notice and become more willing to offer lower interest rates.

Sub Prime Lender Approval

Although a bankruptcy will not prevent you from qualifying for an auto loan, it will make it difficult to obtain a low interest rate. The interest rate plays a huge role in determining your monthly payments. On average, individuals with good or fair credit receive an interest rate of 5 or 6 percent. Individuals who have filed a recent bankruptcy can expect to pay a few points higher. A higher interest rate can increase monthly payments up to $150. Because traditional auto lenders are unwilling to negotiate low rates with recently bankrupt individuals, sub prime lenders are your best alternative.

Improve Credit History

Auto loans after bankruptcy are ideal for rebuilding credit. However, if you do not want to pay a high interest rate on the auto loan, put off obtaining a new car and apply for a new credit card or line of credit. The interest rate received on these types of credit will also be higher. By paying the balance on the new line of credit each month, you will not incur huge finance fees, and your credit report will reflect a good payment history with new creditors. If possible, try and open at least three to four new lines of credit. After you have had the new credit accounts for 12 - 24 months, now is the time to apply for an auto loan. Your credit history and score will have likely improved, thus auto lenders will have confidence in your ability to repay the loan.

Shop Around for the Best Rate

Request quotes from several auto loan brokers. Applying for a quote online is quick and convenient. Submit applicable information such as employment history, income, and desired loan amount. The auto loan lenders will obtain your credit report and negotiate the best rate with various auto lenders.

View our recommended Bad Credit Car Loan Companies here at: Recommended Bad Credit Auto Lenders.

Carrie Reeder is the owner of ABC Loan Guide, an informational website about various types of loans.

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Car Loans Post Bankruptcy - How Long Do I Wait to Get Approved

The key to improving credit history after a bankruptcy is rebuilding credit. There are various ways to rebuild credit. These include obtaining a new credit card, line of credit, or automobile loan. Some people believe that bankruptcy makes it impossible to acquire new credit. However, this is not true. In fact, several lenders specialize in offering loan programs to individuals who have recently filed bankruptcy. Getting an auto loan after bankruptcy is a great way to re-establish credit.

How Long Should You Wait?

There are lenders who are willing to grant an auto loan to you one day after bankruptcy. Of course, you can expect to pay an interest rate a couple of points higher than the current average. A higher interest rate may increase your estimated monthly payments by $50 to $150. If you can afford this increase, obtaining an auto loan is a great way to improve your credit rating. You may have to receive your loan from a sub prime lender. These lenders are willing to negotiate reasonable deals with individuals who have poor credit. Comparing rates offered by online and local auto loan brokers may prove worthwhile. Submit an online application, and within a few hours you will receive a reply from various auto lenders. Compare their offers and rates, and choose the best deal.

If you do not want to pay a high interest rate for an auto loan following a bankruptcy, consider other methods for re-establishing credit. Obtaining a credit card is ideal. Credit card rates for individuals who have filed a recent bankruptcy are extremely high. However, if you maintain a low balance and pay off the balance monthly, you will not have to pay large finance fees. If possible, try and obtain at least three new credit cards.

After the new credit accounts have been opened for six months to one year, try and obtain an auto loan. By this time, your credit score will have improved. If you have established a good payment history with new creditors, you may be able to obtain an auto loan at a reasonable rate. A good payment history consists of zero missed or late payments.

View our recommended bad credit car loan companies here at: Recommended Bad Credit Auto Lenders.

Carrie Reeder is the owner of ABC Loan Guide, an informational website about various types of loans.


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Auto Loans After Bankruptcy - Does Bankruptcy Affect Your Approval
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