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Auto Loans After Bankruptcy – Should You Finance A New Or Used Car?
Deciding whether to purchase a new or used car is a big decision, especially if you have just filed a recent bankruptcy. Of course, the decision is largely based on how bad you need a vehicle. There are valid reasons for financing a new or used car after bankruptcy. On the other hand, there are also numerous reasons to delay the car buying process. Before applying for an auto loan, carefully consider whether now’s the right time to finance.
When Was the Bankruptcy Discharged?
Once your bankruptcy has been discharged, you are free to finance an auto loan, mortgage, or acquire a credit card. However, you will incur huge finance fees or interest. For the most part, financial experts recommend waiting at least six months to a year before financing a large expense.
The interest rate you receive on an auto loan immediately following a bankruptcy will be approximately three percentage points higher than the average loan. This will significantly increase your monthly car payment. To avoid high fees, wait until your credit improves.
Have You Established New Credit Accounts?
After a bankruptcy, it is vital to establish new credit accounts. Bankruptcy gives you the opportunity for a fresh start. Thus, you should apply for new credit cards, department store charges, gas cards, etc. The only way to improve your credit score after bankruptcy is to open new accounts and maintain regular payments. In time, your score will rise, which justifies a better rate on your auto loan.
Choosing an Auto Loan Lender for New or Used Car
If you decide to purchase a new vehicle, the next step involves selecting the right lender. There are quite a few options available. You can obtain financing through a new or used car dealership, or you can secure your own financing. If possible, compare rates from at least three to four money sources. Contact your bank or credit union and inquire of their rates. Notify the lender of your current credit status.
In most cases, you will have to secure financing through a sub prime lender. Some traditional auto loan lenders may offer these types of loans. Another option involves taking advantage of online auto loan brokers.
Brokers will thoroughly assess your credit application, and match you with various lenders. Next, the broker will email you quotes from these lenders. You pick the most desirable loan package.
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DID YOU KNOW?
- Most any large city has a number of small shops offering payday loans. They’re often found in strip centers; sometimes they double as pawn shops. They have a simple business – they lend you money until your next paycheck. The system is pretty convenient; you write them a postdated check for the amount you’re borrowing plus interest. On your next payday, they cash the check and your loan is paid off. What many people who use payday loan services fail to realize is that the interest rates charged by these firms are substantial, often reaching the equivalent of four hundred percent per year!
- To get a secured loan it can take time for loan approval, as the property will be inspected and appraised. Unsecured loans such as credit cards are usually faster to acquire, however the loan approval time may include a credit check. A credit check involves a lender getting a copy of your credit report to inspect your credit history.
- Credit card balance transfers
- All kind of loan – educational loans, auto loans, secured loans, unsecured loans, personal loans and any kind of loans – can be consolidated under debt consolidation mortgage. It is highly appropriate to adopt debt consolidation mortgage if you have numerous debts. However, a prudent step will be to understand debt consolidation if you actually want to apply for it. Debt consolidation mortgage has the capability to be turned in a way so as to allow maximum monetary benefits. Yet, one little error with debt consolidation mortgage and your situation will be back to square one.
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