Clear Talk About Car Loans

Getting a Car Loan after Bankruptcy

Evidence of a bankruptcy can remain on your credit report for ten years, but the effect that a bankruptcy has on your credit score can be reduced the day after your bankruptcy closes. This means that it will still be possible to get credit—like a car loan—even with a bankruptcy on your record.

Here are 5 tips that apply to getting a car loan after bankruptcy. It should be noted that most of these tips can apply to other loans and forms of credit as well:

Check Your Credit Report

Before applying for a car loan or any other type of credit after bankruptcy, you will want to take a look at your credit report to make sure all of your bankruptcy business has been settled. If you have open accounts that were included in your bankruptcy, you will need to contact the three major credit reporting bureaus to have the errors corrected.

Build Up Your Credit

Although you can apply, and possibly get approved, for a car loan the day after your bankruptcy closes, you will qualify for better rates and terms if you take at least six months to build up your credit. Paying student loans and other bills on time will help, as will getting a secured, or if you can manage it, an unsecured credit card.

Keep Your Debt to Income Ratio Low

It will be much easier to get approved for a car loan after bankruptcy if you have a low debt to income ratio. This essentially means that you need to have a lot more money coming in than you have going out. Keeping credit card balances to a minimum, and using your available credit wisely will keep your debt low.

Find an Understanding Lender

You may not be able to get a car loan after bankruptcy from your local credit union, but an understanding lender who specializes in post-bankruptcy car loans won't think twice about approving you. The key is to find that lender.

Shop within Your Means

Finally, be sure to shop within your means. It will be much easier to get a car loan after bankruptcy if the lender is confident in your ability to afford the monthly payments. If you aren't sure how much you can afford, there are various calculators online that help you crunch the numbers. You could also search out a lender who will pre-approve you before you go car shopping.