If any of this sounds like you, call us about financing a car after bankruptcy. We are on your side, and we have lending partners that can work with you to get the car loan you need to make a reasonable purchase. Give us a call, email us, or stop by the dealership if you have any questions. We would love to work with you.
How Long After Bankruptcy Can I Buy a Car Loan?
So you’ve had to file for bankruptcy, but life continues, and you now need a car. How long do you have to wait?
If you file Chapter 7 bankruptcy, you will have to wait until the process has finished and your credit is unfrozen. This will generally take about 6 months, and you will need that time to improve your credit score anyways.
Chapter 13 bankruptcy is a different story. This process is long, arduous, and involves a trustee. It can take up to five years for the Chapter 13 bankruptcy process to finish, and it’s reasonable that you will find yourself in need of a car during that time. If you need to buy a car during Chapter 13 proceedings, you will need to demonstrate sufficient need, financial recovery, and you must obtain permission from your trustee.
So What If I Get a Car Loan Right Before Filing for Bankruptcy?
If you see an impending bankruptcy on your horizon, it usually isn’t a good idea to try and squeeze in a car loan. A judge may see that as an attempt at bankruptcy fraud, and you may end up losing that car anyways if your assets are liquidated in Chapter 7 bankruptcy. You have to own a certain threshold of equity in an item to save it from Chapter 7 bankruptcy, so getting the car right before you file is most likely not in your best interests.
If you do end up buying a car on financing right before you must file bankruptcy, you would probably do better to file Chapter 13 bankruptcy. Your assets are not immediately liquidated in this filing, although it does bring its own problems.
Financing a Car after Bankruptcy
If you have gotten through Chapter 7 bankruptcy, or if you receive sufficient permission from your trustee following Chapter 13, it may be time for you to buy a car. But how do you go about it, and will you be able to get a loan?
First of all, please don’t hesitate to contact us about a car loan after bankruptcy. We are experienced in this area, and we have lending partners who would be happy to work with you. Here’s the only catch -- you may need to deal with higher interest rates.
Your interest rate is determined by how much “risk” you pose to lenders, and if your credit score indicates higher risk, your interest rate (in this case, reflected by an annual percentage rate (APR)) may be high. The cost of interest can add up over the years, rendering a new vehicle all but unaffordable.
To mitigate the effects of high interest, we recommend saving up a substantial down payment. 20% is a great place to start, but the higher your down payment is, the better.
Take Steps to Improve Your Credit Score
All things considered, you will still need to do some legwork to correct your credit score. To secure a long-lasting change in your score, you can implement some new habits, behaviors, and protocols, and to expedite the recovery of your score. You can hire some outside services to take care of the harder elements.
Firstly, and most obviously, your outstanding bills must be caught up for your credit score to improve. This includes your insurance bills, house payments, car bills, credit card balances, and even those small, easily-forgotten balances on department store cards that you only opened to get a discount.
Secondly, you can aggressively maintain your credit card balance. You will see significant improvement in your score if you keep your balanced owed below 30 percent of your credit limit; in other words, if your credit limit were to be $1,000, never allow your outstanding balance to remain above $300. This may sound unreasonable, but the impact on your credit score is surprisingly large.
Once you’ve done everything that you can you can do to improve your score, you may need to employ a credit correction service to raise it to the next level. These services, which often employ a number of lawyers, can reach out to the major creditors to have items, such as missed payments, removed from your credit score. This process is challenging and time-consuming, and you may not get much done if you try to undertake it on your own.
Rest assured that when you search for a “Kia dealership near me,” you are included just as much as anyone else. You can’t throw anything at bankruptcy car dealerships that we haven’t seen before, and we believe that unfortunate financial events during one period of life shouldn’t preclude you from ever being able to purchase the Kia that you need.
Please let us know if you have any questions about how to get a car loan after bankruptcy. We would love to help you find the vehicle you need.