When you are awarded a bankruptcy discharge, you are usually anxious to get started on your new, debt-free life. Often this means making purchases on items you lost in bankruptcy or you could never afford before. For example, you may want to buy a new car, but you’re not sure if you can get approved by a bank. While getting a car loan after bankruptcy is not impossible, it can prove somewhat difficult.
For help obtaining a car loan after bankruptcy, you should reach out to a Cleveland bankruptcy lawyer at Cleveland Bankruptcy Attorneys right away. We can help you obtain a loan so you can get back on your feet after bankruptcy.
Call us today at (216) 586-6600 to schedule a free consultation.
Buy Used, Not New
Now that you have some cash, you may want to buy a brand new car. However, even if your budget has room for a down payment as well as monthly payments, a bank may not grant you a loan.
When a bank considers you for a loan, they put a lot of emphasis on your credit score to determine how much they will lend you and at what interest rate. Your bankruptcy discharge will have a negative effect on your credit rating, which means you may be considered a high risk to banks. Any loan for which you are approved could carry an exponentially high-interest rate.
Because of this, it may be a good idea to look at a used car instead, since used cars can be much more affordable than new ones. Doing so can help you stay current on your payments, and therefore, increase your credit score.
Rebuild Your Credit
Now may be the best time to focus on rebuilding your credit, rather than borrowing more money. Getting a car loan after bankruptcy that you can afford may help raise your score, but there are faster ways to do so. For example, getting a credit card and using it to make small purchases that you pay off every month helps increase your credit rating quickly. In fact, if you pay off the card after your purchase, rather than waiting to the due date to pay it off, your score could go up even faster.
Reaffirm Your Car Loan in Bankruptcy
If your current car loan is one of the bills part of your bankruptcy, you might be able to keep the car, rather than having it repossessed by the dealer. Chapter 7 bankruptcy will allow you to reaffirm the debt, which essentially means you promise to continue making the payments on the car, rather than having your loan discharged in bankruptcy.
When you reaffirm the loan, you will sign a new contract with the dealer, but it will be based on the current terms of your car loan. Before you take this step, you should make sure you can afford the payments. If you reaffirm and then fall behind, the dealer can repossess your car and sue you for the remaining amount you owe. Thus, it is best to discuss reaffirming debts with an experienced bankruptcy lawyer before doing so.
Contact a Cleveland Bankruptcy Lawyer
If getting a car loan after bankruptcy is one of your main concerns, be sure to talk to a lawyer about it. Our Cleveland bankruptcy lawyers at Cleveland Bankruptcy Attorneys are readily available to discuss personal bankruptcy and how it affects your credit and personal possessions.