If you’ve had to file for bankruptcy, you’re probably looking very carefully at your finances. While bankruptcy can be quite difficult to recover from, it’s certainly not impossible and sometimes the smartest financial decision you can make. Unfortunately, after filing for bankruptcy getting approved for credit cards, personal loans, and especially a mortgage can be nearly impossible. So how does one rebuild your credit post-bankruptcy someone might ask? Well, even with a bankruptcy in your past (or even an ongoing bankruptcy), with FA Financing you are pre-approved with one of our many lenders to get back into a used vehicle. Financing a vehicle is the easiest, quickest way to re-establish positive credit and get your credit score back on track.
Pros of Financing a Car After Bankruptcy
So, why should you finance a car after bankruptcy? If you consider the process as a tool to help you improve your financial situation, buying a car after bankruptcy can be a great decision. Of course, it gives you a mode of transportation but buying a vehicle also helps you to rebuild your credit. Before you decide on which car to buy, just be sure that you will be able to afford your monthly payments, you are purchasing something reliable(the newer the model, and lower the mileage the better), and always invest in an extended service contract and GAP coverage. If not, you could wind up in an even worse financial situation.
Many people choose to simply wait and save up their cash to purchase a car after bankruptcy. Although this sounds like a smart strategy, it is not always a viable option due to income and time constraints. If you need a car right away, this is not an option for you. Financing a car is entirely possible and can help you re-establish yourself as reliable and creditworthy.
Types of Bankruptcy
The type of bankruptcy that you have filed will impact the best way to go about buying a car. If you are involved in Chapter 7 bankruptcy, the court has liquidated your assets and has distributed them to your various creditors, helping to repay your outstanding debts. Chapter 7 bankruptcy tends to be completed relatively quickly, often around three to four months. You’ll officially be debt-free after you receive your Notice of Discharge, but that bankruptcy will remain on your credit report for 10 years, which can make it difficult for some companies to secure a car loan, but not with FA Financing, due to our established relations with specialized lenders, who actually favor bankruptcy clients. With FA Financing you don’t even have to wait for your bankruptcy to be fully discharged, once you have your 341 meeting of creditors we can get you into the vehicle you want that same day!
On the other hand, you might be involved in Chapter 13 bankruptcy. Whereas Chapter 7 bankruptcy discharges your debts, Chapter 13 bankruptcy restructures them. In this case, you’re able to save your assets instead of having them seized. Unfortunately, Chapter 13 bankruptcy can be quite lengthy, taking up to five years or more in most cases. You’ll also need to have the permission of the bankruptcy court in order to take on additional debt such as a car purchase. Additionally, the bankruptcy will remain on your credit report for multiple years, much in the same way that it does with a Chapter 7 bankruptcy. Since Chapter 13 bankruptcy can drag on for years, the bankruptcy courts are often sympathetic to those who need to buy a car. After all, the courts often recognize that most people need a car to hold down a job.
Choosing a Vehicle
Regardless of which type of bankruptcy you’ve had to file, one thing is for certain: your car purchase should be economical. Having a bankruptcy on your credit report will put you into the subprime buyer category, which can make it difficult to get approved for a loan. When you do get approved, you may find that your interest rates are much higher than those with a better credit score. However, this can be mitigated with a big down payment, a newer vehicle with lower miles, and refinancing once you re-establish some positive credit history. Still, if you know that you’re able to afford your monthly payments, it can be a good decision to rebuild your credit.
The key when choosing a vehicle is to think of it as simply a transportation method. You’ll almost always want to purchase a modest, used car. As a general rule, try to select a vehicle that doesn’t cost more than 15% of your take-home pay. Once you’ve built up your credit and put your bankruptcy in your past, you’ll eventually be able to qualify for that brand-new car you’ve been eyeing.
After You Buy Your Car
So you’ve managed to purchase your car. Congratulations! Now, what can you do to make sure that you don’t negatively impact your financial health any further? Perhaps the most important thing is to make your payments on time, every time. Also, it is wise to invest in an extended service contract and GAP coverage if financing allows. Although most used vehicles from dealerships go through some type of inspection, it is still a used car. Not only will you be working to rebuild your credit, but you’ll also ensure that your dealer or lender doesn’t have any reason to consider repossession. In a worst-case scenario, you would be left without transportation and in a worse financial situation than before.
Ultimately you’ll want to work on re-establishing your credit in other ways as well. Check your credit reports regularly to make sure that they accurately reflect your current financial situation, including the proper closure of any applicable accounts. You may also consider opening a secured credit card with a cash deposit; there are plenty of credit card options that specifically serve those who have applied for bankruptcy, and credit-builder loans, where the funds are held in an account and aren’t released until you’ve made the monthly installments to satisfy the loan.
Let FA Financing Help
As we stated, many people find it difficult to get approved for auto financing if they’ve dealt with bankruptcy. Luckily, FA Financing is experienced in helping buyers of all kinds secure auto financing and get the car they need, regardless of bankruptcy status or a low credit score. We are proud to work with an extensive network of lenders who specialize in helping those with bankruptcy matters, as well as those with multiple repossessions or multiple auto loans.
In addition to connecting you with the best lender for your situation, FA Financing can also help you enhance your credit application. We are able to focus on your strengths and present you in the best light to lenders, giving you a better shot of getting approved. Additionally, you’ll find that your terms and interest rates are often more favorable than they would be if you went at it alone. Contact FA Financing today to discover how we can help you secure a car on your way to financial recovery.
