Getting a car loan after bankruptcy raises a lot of challenges and for many, it may seem almost impossible. Most lenders will not approve your car loan but there are a few things that you can do to shift the odds in your favor.
To start things off, you should know that both Chapter 7 and Chapter 13 bankruptcy will remain in your credit report for up to seven years. The credit report will include all aspects of how you manage your finances and debt and bankruptcy will lower your credit score. If your credit score drops around 600, you should expect to pay a higher interest that can go up to almost 21%, and not that many lenders will approve your loan.
What you should do first is to check your credit. From that point, you should work towards improving your credit score. This can include simple things such as paying debt on time, getting a secured credit card, a credit-builder loan, and several other types of debt that can improve your credit score.
To further increase your chances of having your car loan approved even if you have a bankruptcy on your credit report is to come with a down payment. The average down payment for a car is about 12%. If you manage to put down 20%, your chances of getting approved go up significantly. Lenders will consider that if you can come up with a higher down payment, it is a sign that you can pay the loan back.
Lastly, you can try your luck with lenders that work with customers that have subprime credit. They are more likely to approve your car loan even if you have a bankruptcy in the past. These lenders do have a higher interest rate but you can get a reasonable deal if you shop around and compare offers.
