Qualifying for a car loan after bankruptcy is not a “walk in the park” because lenders will be concern that you will default on the loan. They will view you not as a credit worthy risk. To get a car loan then you will have to demonstrate that you are credit worthy and there is a low risk of you defaulting on the loan.
Some of the post bankruptcy steps that you can take is to deposit a large amount on the car loan, get a co-singer for the loan, put up some collateral, or showing evidence of steady income including showing that your spending are 30% under your credit limit as determined by your credit report.
1) By putting down a large deposit you are demonstrating to the car dealer that you are willing and able to pay for the loan. It also indicates that you are risking your money to buy a car that may or may not work for a long time. A deposit that is 20% of the loan is usually advisable. Also, by placing such a large deposit down the interest rate and the length of the loan will decrease.
2) Having a reliable person co-sign for you is one of the most used methods of obtaining a post bankruptcy car loan. However, when engaging in a co-signing relationship you agree to share the plus and minuses of credit activities. The co-loan can be a good thing for you as it will help you to repair your credit. As long as you pay on time your credit will improve.
3) Collateral such as homes and other valuable assets can be used to obtain the car loan However, you must be careful because if the loan is not paid on time you run the risk of losing your assets. There are instances where your local bank will allow you to use your home equity line of credit. There are times when the dealer will ask for more than one collateral. Please note that there is also a possible that your credit score will temporarily be lowered as your debt to asset ratio increases.
4) Have a few respectable people in your community vouched for you. Get a list of three references from note worthy people that are willing to help you get your credit back on track. Having people testify to your credibility can go a long way to having your loan approved
5) Come to the dealership prepared with all the documentation that you may need. You should have proof of residence, proof of employment, a drivers license and in some states a proof of insurance, if you are doing a trade in.
6) When you visit the dealership or bank loan manager ensure that you are dressed formal and professional. People assess you by the way you dress. There is always a dose of bias in every loan decision.
Earnest Younge writes on bad credit car loans and how to choose the best Car Loan After Bankruptcy for your needs. Also published at Can You Qualify For a Car Loan After Bankruptcy?.
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