How to Get a Bad Credit Bankruptcy Car Loan

A bad credit bankruptcy car loan may be difficult to get from a bank, but they're still available from specialist poor credit lenders. It's in the interests of the lender to offer money to people who can demonstrate affordability because an adverse credit history means additional profit for them. They also benefit from security because the car acts as a form of collateral should you ever default on the arrangement. As you can see, there are genuine reasons why you're likely to be granted credit.

Raising FICO Credit Scores

The longer you wait before buying a car after bankruptcy the more likely your application is to be approved. This is particularly true for those who continue to make punctual repayment on other credit agreements, such as the mortgage or unsecured credit cards for bad credit.
FICO credit scores will improve substantially after two years of reliable payments. This could allow you to refinance a bad credit car loan at a vastly more favorable rate of interest.

Correcting Errors on Credit Reports

It may surprise you to discover that many credit reports contain inaccurate data. Get access to your free credit report and scrutinise it for mistakes. Should there be any errors, you should contact the credit reference agency (with supporting evidence) directly in order to get the problem rectified. With the exception of credit cards, you shouldn't contact the lender directly.

It's important to get errors corrected at least 6 months prior to applying for a bad credit bankruptcy car loan. Although not a completely free service, help and assistance can be sought from a licensed attorney.

Establish Affordability

Those buying a car after bankruptcy will need to prove that the payments are affordable. This is because lenders realize that people with a high debt to income ratio or minimal disposable income are far more likely to default on a bad credit bankruptcy car loan than those who don't.

Many borrowers make the mistake of borrowing more than they can afford. It's important to budget properly in order to establish a sum of money that can be maintained until the loan is fully cleared. Failure to achieve this will lead to the lender selling the vehicle and the borrower being responsible for the repossession deficiency. It's possible to avoid this setback through proper budgeting. Don't buy an expensive car simply because you've been offered sufficient credit to do so.

Car Loan Lenders

Rather than approaching a dealership, use a car loan broker to source the most competitive deals. This will also provide an opportunity to explain why financial difficulties were originally experienced.

Provided that affordability can be established, a bad credit car loan is achievable. Trawl the market using a car loan lender to get the best deal. Remember to refinance a couple of years later once your FICO credit score has started to improve.

Disclaimer: This article in no way attempts to provide legal, financial or tax advice. One should consult a licensed attorney, tax advisor, or other qualified financial professional before proceeding.

Updated: 22 March 2011