Most people overestimate how hard it is to get back on your feet after bankruptcy. The best way to rebuild credit is to start making payments on time to new creditors. To do this, you'll need to open new accounts. After filing for bankruptcy, it can be hard to get new lines of credit. Lucky for you, many lenders have programmes that let you start over after bankruptcy. If you want to improve your credit score, you might want to apply for an auto loan.
Pros of Getting a Car Loan After Filing for Bankruptcy
If you don't start building a good credit history right away after filing for bankruptcy, your credit score won't go up. If you are going to file for bankruptcy, you should learn how to quickly improve your credit score. One of these strategies is financing a car.
Most places that give out auto loans will give loans to people with bad credit. Loans for cars and other vehicles are backed by collateral. So, if you don't pay back the money, the lender may try to get it back.
Getting an auto loan after bankruptcy is not a good idea
Auto loans after bankruptcy are very common because they are one of the quickest ways to get your credit back on track. The bad thing is that the interest rate on these loans is very high.
Interest rates depend a lot on how good your credit is. If you have bad credit, you might be able to get an interest rate in the 9–10% range. But if you have very bad credit, the interest rate could go up to 18%. Still, you can refinance to get a better rate once your credit gets better.
Using High Risk Auto Lenders
If you're getting a new car after bankruptcy, it's a big no-no to take financing from the dealership without shopping around. Dealerships are in business to make money. So, many dealerships charge higher interest rates and fees for financing. Before you sign a loan agreement, look around and see what else is out there.
There are many kinds of loans available from high-risk or "subprime" auto lenders. All types of credit can get these loans. In addition, the prices are very reasonable. Fill out an online application with an auto loan broker to get quotes from sub prime lenders. Most brokers can give you quotes right away and show you offers from many different lenders.
