Even if you have faced bankruptcy in the past, you can still apply for a car loan. Before you apply, you need to get an “Authorization to take debt” from your trustee.
Banks have a policy when they lend to those that have had recent bankruptcies. They will only let you borrow half of your yearly income.
This means that if you have a yearly income of $50,000, you can get a loan till $25,000. The monthly payments can also be limited to 10-15% of your monthly gross income. If you are making $5000 a month, then you can make a payment for only $500 – $600 a month.
You should have at least 10-20% of the amount to put down as a down payment. If you don’t have any money for down payment, you may not be considered for a loan. When you meet the loan officer, you should tell them honestly the reasons for your bankruptcy. At the car dealerships, find a car and negotiate the price before you tell them that you have had a bankruptcy. Else they may tell you, that you qualify for only a few cars.
Write down the interest rates and the figures for the monthly payments. Ask the car dealers to write down all the payments. Don’t buy anything extra like undercoating, credit insurance extra. If you need insurance, then call your insurance agent. If you are going to trade in the car in the next 18 months, then don’t load it with extras.
Get some online quotes for the loan before you actually purchase a price, since the rates can differ from dealer to dealer, even if it’s the same car. In this way, you can negotiate for a good interest rate.
Getting a used auto loan
There are a number of places where you can get used car loans. There are a number of lenders that are present both online and offline that can give you used auto loans. You can apply for the loans at banks, car dealerships, and credit unions. Even those with bad credit can get used car loans.
Keep your credit score and credit report handy. Banks, car dealerships and credit unions use the FICO score. In fact, 90% of all financial lending institutions use the FICO score. Your credit score is an amalgamation of the payment history and transactions that you have made. If you don’t have a credit report, then you would be treated as if you have a bad credit score.
Keep your salary stubs or the bank’s statements ready (the bank account in which your salary is credited). You should also be able to prove that you are a resident of US or Canada and are 18 years and above.
With these documents, you can get pre-approved from your bank. With a pre-approval, it’s easier to get a loan. Once you have been pre-approved for the loan account, don’t go overboard else you would end up paying a higher monthly payment than you can afford. Many of the car dealerships, banks, and credit unions may not finance a private purchase. Check before applying.
At the car dealerships
It’s important to check the condition of the car before buying it. Ideally, the car should have run less than 60,000 miles and should be less than 5 years old. Get the car thoroughly checked from an independent mechanic, before the final purchase of the used car.
Getting a bad credit auto loan
Getting a bad credit car loan isn’t difficult at all. Most financial institutions including banks and credit unions are ready to give bad credit loans for cars and other vehicles. There are certain conditions that need to be fulfilled before car loans can be given.
You should have a gross income of $1500 or more. You should be able to prove it should your salary stubs or the statement from the bank account in which your salary gets credited
You should be a resident of US or Canada and should be able to prove the same. You can prove your residency through utility bills and credit card statements.
In the past 12 months, if you had vehicle repossession, you can’t apply for a bad credit car loan.
If you are bankrupt, you may be able to get a loan if you get an “authorization to get debt” from the trustee.
There are a number of online sites that can offer auto loans. For this, you would need to fill in a questionnaire regarding your personal details, income details and credit details. Based on these details, you would be matched with a number of lenders that can help you.
The interest rates on these loans can be extremely high depending on how bad your credit is. The interest rates can vary between 12-17%. But you may still be able to negotiate the credit rates with your bank or credit union. By paying monthly payments on time, you can improve your credit rating. Improvement in credit scores will let you get lower credit rates for taking loans in the future.