Even if you have a history of bankruptcies, the process of getting a car loan is fairly simple.Assuming you definitely need a car, your goal should be to find the most reliable car at the cheapest rate.You don't have to expose yourself to predatory lending practices if you file for bankruptcy.If you're in the market for a new car and want to reestablish your credit history, financing is the way to go, you are not alone and there are other options available to you.
Step 1: Do you really need a new car?
Buying a car is one of the most important financial decisions you can make.In most cases, vehicle ownership is the second largest expense.Consider the total costs of car ownership, including gas, insurance, maintenance, depreciation, property tax, parking and tolls, and see if you can afford them with a high-interest car note.Delaying the purchase of a new vehicle gives you more time to research the best deal, save up for a larger down payment, and establish better credit.Public transportation and taxi service costs can add up if you don't own a car.If your friends or family drive you to work, school or the grocery store, you may be entitled to a reimbursement.You will need permission to take on new debt while in a repayment plan if you are in the process of filing Chapter 13 bankruptcy.Chapter 7 liquidates the assets of a debtor and gives the money to the secured debtor.
Step 2: The largest possible cash down payment should be set aside.
You could save hundreds of dollars in interest expense and loan processing fees if you paid for the car with cash.Lower risk for your lender and lower interest rates for you come from larger down payments.If you sell the car yourself, you may be able to get more cash than if you trade in the existing car.Unless you are buying an old car, 10% is the bare minimum.If you have more cash, you may be able to get a better deal with the dealership.If you have a 25% or 40% down payment, you can negotiate a lower sales price or better terms for your loan.
Step 3: Take a look at your credit reports.
Pay special attention to previous auto loans that are weighted more heavily in the credit score used by the auto lender.Errors or negative information can affect your credit rating.Everyone in the US is entitled to a free credit report.You can request a copy of your credit reports by phone or visit www.annualcreditreport.com.US regulations only allow you to get a free credit report.There are attempts to sell additional items that cost money.If a pre-bankruptcy car loan is unchanged, it should show up on the credit report.If your auto loan payments aren't represented on your credit report, you need to get proof.
Step 4: Responsible payment history should be demonstrated.
A couple of months of responsible credit management can help you get a better interest rate on a car loan.You need at least six months of good credit to apply for a car loan.You should be able to document as many months of responsible payment history as you can on any existing car loans, home mortgage or rent, and utilities.Purchase a secured credit card with a minimum $500 cash deposit and pay the entire balance in full every month.
Step 5: You can get pre-approved for a car loan through a bank, credit union or online lender.
Better negotiating power, a more streamlined buying process, and possibly reduced financing fees are all benefits of pre-approved financing.You should gather all of your financial information and shop around for the lowest rate.If you have an existing relationship with one of the banks or credit unions, start there.If your credit score is too low to qualify for a car loan, look for alternative lenders.Prepayment or early payment penalties should be investigated.You may be required to pay interest on the loan for several years.Refinancing loans will be more expensive as a result of these penalties.It's important for people to improve their credit by re-financing within a year.Compare rates online, they compete directly with each other for your business.You can use these sites to find competitive rates even if you have filed for bankruptcy.It's a good idea to set a single day aside to shop.If the time between the first and last inquiry is less than 45 days, multiple applications for the same loan are counted as a single inquiry.
Step 6: Don't shop for the cheapest deal.
You should do homework on the dealership you plan to buy the car from.Consumer Reports and online dealer ratings and reviews are available.Reliability is more important than comfort and style.The dealer can give you a pre-approved rate.Take the time to review the numbers in the sales contract so you know what you're paying.There are hidden costs in the contract for services that you don't need.It's a good idea to skip the extended warranty and service contracts.These are not going to be worth it for most people.Consider a used car that has low mileage.Check the vehicle's maintenance records and get the full history report.Since the cars cost less, there is less to finance and the payments will be lower.Depreciation and insurance expenses are not as high.
Step 7: Make payments on time.
If you find yourself unable to keep up with your vehicle loan payments, contact your lender as soon as possible to investigate your options to avoid the loss of your car.You will owe the difference between the car's auction sale price and the pay-off balance on your loan even if you turn the keys in.
Step 8: Refinancing options should be looked at every six to twelve months.
You are likely eligible for a better car loan now that you know where to shop for good car loans.The savings at your new lower interest rate must be greater than the costs of the new loan and the early payment penalties on your existing loan.