Where to Apply for Car Loans After Bankruptcy, Foreclosure or Repossession
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If you have a credit history that includes bad debts, bankruptcy, repossession or foreclosure, it's easy to get discouraged when applying for financing for a car. But there are places you can go to apply for legitimate loans so you can purchase what you need for your business or personal needs.
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For more help getting an "awful credit" loan for an automobile, check out 25 tips for helping you finance your auto purchase.
Car Loans are Easier With Better Credit Scores
Tip: Try to repair your credit as soon as possible. By re-establishing your credit with positive payment habits, you can increase your credit score over time.
With good credit habits, after a while your Chapter 7 or Chapter 13, poor debt history or other blot on your credit record will be in the past and you'll have re-established your credit history.
And then lending institutions are more likely to offer you better interest rates on loans for major purchases such as automobiles.
Where to Get a Car Loan
Here are some sources of car loans to try post-bankruptcy or after any bad-credit experiences. To get the best rates, you should repair your credit first, if at all possible, using tried and true methods.
Bank
If you've had a bankruptcy discharge, check with the bank with which you still have an account for a possible car loan. Many people who've gone through foreclosure or filed for bankruptcy and now have poor credit are embarrassed or afraid of going to the bank and asking for a car loan, but your credit may not be as horrible as you think. Although the bank will take your "horrible credit" into account, it may offer you a vehicle loan at a higher interest rate that reflects the credit risk you represent to them. And the chance that you'll be offered the loan by the bank is greater if the amount you ask for is not too much. The bank may choose to offer a secured loan in which you put up property such as your car as collateral.
Credit Union
Credit unions generally have low interest rates on auto loans, and especially for used car loans. If you can join a credit union and are eligible to take advantage of their car loan programs, you can enjoy a lower rate on your car loan. Tip: Handle your own paperwork when getting a car loan from the bank or credit union instead of letting the car dealership do it, which would involve extra costs.
Car Dealership
While convenient, car dealerships can be expensive to get car loans from. They get the money by borrowing it from lending institutions. Occasionally they may offer auto loans to employed people without any credit history or even to people with a horrible credit history.
Small Loan and Finance Companies
If you have horrible credit, small loan companies or finance companies may be an option. However, you pay for the "anyone is eligible" policy of many finance companies by very high rates (usually the highest they can legally charge) and very strict collateral or loan security policies.
Close People You Know
It may be necessary to think of your relatives and friends as a resource when you have horrible credit but want to buy a car. Talk to your parents or someone trusted about whether or not they are willing and able to offer you a loan to purchase a vehicle. Even with someone you know personally, use a signed, dated and witnessed written contract including how much was borrowed, how long the loan stands, what the interest rate is, what the payment schedule is, and what the cost of the car is.
