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Auto Loans After Bankruptcy – Should You Finance A New Or Used
Car?
By Carrie Reeder

Deciding whether to purchase a new or used car is a big
decision, especially if you have just filed a recent
bankruptcy. Of course, the decision is largely based on how bad
you need a vehicle. There are valid reasons for financing a new
or used car after bankruptcy. On the other hand, there are also
numerous reasons to delay the car buying process. Before
applying for an auto loan, carefully consider whether now’s the
right time to finance.

When Was the Bankruptcy Discharged?

Once your bankruptcy has been discharged, you are free to
finance an auto loan, mortgage, or acquire a credit card.
However, you will incur huge finance fees or interest. For the
most part, financial experts recommend waiting at least six
months to a year before financing a large expense.

The interest rate you receive on an auto loan immediately
following a bankruptcy will be approximately three percentage
points higher than the average loan. This will significantly
increase your monthly car payment. To avoid high fees, wait
until your credit improves.

Have You Established New Credit Accounts?

After a bankruptcy, it is vital to establish new credit
accounts. Bankruptcy gives you the opportunity for a fresh
start. Thus, you should apply for new credit cards, department
store charges, gas cards, etc. The only way to improve your
credit score after bankruptcy is to open new accounts and
maintain regular payments. In time, your score will rise, which
justifies a better rate on your auto loan.

Choosing an Auto Loan Lender for New or Used Car

If you decide to purchase a new vehicle, the next step involves
selecting the right lender. There are quite a few options
available. You can obtain financing through a new or used car
dealership, or you can secure your own financing. If possible,
compare rates from at least three to four money sources.
Contact your bank or credit union and inquire of their rates.
Notify the lender of your current credit status.

In most cases, you will have to secure financing through a sub
prime lender. Some traditional auto loan lenders may offer
these types of loans. Another option involves taking advantage
of online auto loan brokers.

Brokers will thoroughly assess your credit application, and
match you with various lenders. Next, the broker will email you
quotes from these lenders. You pick the most desirable loan
package.

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Source: http://www.isnare.com