It is possible to obtain a car loan after bankruptcy. There is a stiff competition among the various lenders and to grab prospective clients, lenders do not worry much about the bankruptcy and other bad credits in the past. An auto loan can be easily obtained rather than a personal loan. If it is an unsecured loan, the process can be very fast and there is no collateral security provided against the loan amount. The loan tenure may be around 5 to 7 years. There cannot be much difficulties placed in getting a bank loan for the vehicle. Refinancing could be a better option and it will help the borrowers in the long run. It would actually save few thousand dollars in the loan.
Here are some tips to get the approval for a car loan after bankruptcy.
Getting a new car loan will help to re-establish the credit when payments are done promptly. If the payments are made regularly for at least 6 months, the borrower is entitled to have a lower interest rate. This helps in building a good credit score.
Make sure that all the accounts are in order. Try to close the open accounts or take your time to approach the lenders until sufficient funds are got.
The interest rates can be as high as 14-19% for persons who have been bankrupted in the recent past. It is advisable not to buy expensive cars. It is better to stick with a cheap car because it will bring down the risk involved in the transaction. However, the lenders may approve for a car loan after bankruptcy, but sill they will have a suspicious eye on the borrower in such cases. If the borrowers still pursue to buy an expensive car, it is good to wait for tenure of 2 or 3 years to build up a good credit score and then apply for the loans. This will bring down the interest rates possibly to 9-10% or less.
Ordering for multiple offers from various lenders might be helpful to compare the features and the best one can be picked from the lot. The individuals must find a lender who could offer tailor made solutions to their demands.
Consider adding an extra page explaining the situation that led to bankruptcy. Lenders might consider approving for a better rate than normal rates if it had any extenuating circumstances.
Getting approval for auto loan after bankruptcy will demand some commitment towards payment from the borrower. Lenders expect the borrowers to pay a huge down payment and to repay the monthly installment regularly. This will install some confidence on the lenders and everything can be smooth. Car loan lenders make a profitable business with their borrowers. They can work with many financing partners to support the loan amount. It is important to mention any changes that have a positive impact on the credit history after declaring bankruptcy.
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Article By: Robert Watson