Filing for bankruptcy can have a tremendous negative impact on your credit score. And getting any kind of loan after you’ve filed for a Chapter 7, 11 or 13 bankruptcy can be nearly impossible. Note… nearly impossible, not impossible! Thus, if you want to get a car loan, you still have some options available for you in your buying car bankruptcy situation.
How Can You Buy A Car After Filing For Bankruptcy
One option you have is paying for it outright. Of course, cars paid outright tend to be wrecked; nothing really pretty to talk about. You also have the option of saving your money. This option, however, is not always feasible but one that every consumer should know about.
Of course, these are not the only two options a person has to get themselves a decent used vehicle once they’ve gone through the bankruptcy proceedings. You can always get a bad credit used car financing. Still, that doesn’t deal with the issue at hand - used cars are often a better choice than new cars.
Why People With Bad Credit Should Go For Used Vehicles
It can be difficult to rebuild your credit once a court has declared you insolvent. It can be done, however and it must be done in an intelligent manner. Most decent but cheap new cars still price around $10,000, and when you’re trying to rebuild your credit, you don’t want to incur new debt when you trying to keep the level of money leaving your household down. When a person lives beyond their means, it can get them into serious financial trouble; many times leading to a bankruptcy. A new vehicle’s monthly payments can, oftentimes, be more than a used vehicle’s monthly payments.
There are other reasons a person should opt for a used car over a new vehicle if he/she finds themselves in a buying car bankruptcy situation. One of the most important one is to find a car that doesn’t cost as much and gives you short term loans. If you’re able to pay these loans off quickly, this gets reported to the credit agency and your score will rise. It all comes back to one thing… money!
If a person has a bankruptcy on their credit report and has a low credit score, they tend to be charged with higher interest rates; much higher than a person with a good credit score and no bankruptcy. It’s very understandable that a bank would look down upon giving someone a low interest rate when they’re already having problems paying for other things, as they are a higher risk. Pre-owned vehicles tend to cost less, which means a person can save money on the interest that occurs on the life on the loan.
The only reason a person with bad credit and a bankruptcy on their record should get a new vehicle is when they’ve come into a great deal of money that allows him/her to purchase it out right and without any financing.