How to Finance Vehicle Payments After Bankruptcy

Filing bankruptcy can damage a person's self esteem as well as his credit history, but there is an upside. When the discharge is complete, you have a devastated credit score, but you have no debt either. Provided you are working and receive reasonable income, there are lenders who feel that the risks your bankruptcy filing and resulting low credit score present are acceptable given that a new loan will be your only debt obligation. That makes buying a car following a bankruptcy discharge not only possible, but relatively easy.

Instructions

Instructions

1

Be very upfront about your situation to potential lenders or auto dealerships. Try cold calling dealers in your area and asking them if they have a financing program or division that deals with bankruptcy customers. Always get a firm "yes" or "no" before you allow anyone to inquire about your credit.

2

Begin searching for the right car loan in as little as three or four months after your discharge. It may take some time to find just the right loan, so begin early and let the process happen.

3

Be prepared to pay a very high interest rate. High-risk customers get high rates initially, but often are given the option to refinance after a certain period of time. Your credit score should be continually improving, so refinancing that high-interest loan after a couple years of on-time payments could save you as many as 10 points of interest.

4

Join a credit union. Research the available options in your state and find a credit union in which you qualify for membership. This can save you several points right at the start, and credit unions are often more flexible with their loan terms and approvals.

5

Find the right car. Zipping around in the latest convertible might feel good for a while, but it's that kind of decision that likely contributed to the bankruptcy filing. Keep an eye out for cars that would carry a payment of around 15 percent of your monthly gross income, and you're more likely to get approved.