How Long After Bankruptcy Can I Finance a Car?
When you declare bankruptcy, one of main downsides is that your credit rating takes a severe hit. In exchange for being forgiven most of your debts, you will be seen as a credit risk by lenders for up to 10 years, the length of the time that the bankruptcy will stay on your credit rating. This can greatly hinder your ability to receive financing for the purchase of a car or a house.
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Features
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While the amount that bankruptcy lowers your credit score varies depending on a number of factors, including the amount of debt written off and your previous credit history, in most cases you will be unable to receive credit at reasonable rates in the months immediately following the declaration. This will means that you will not be able to receive a car loan in your name.
Time Frame
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The specific amount of time that you will have to wait before your credit score has returned to a level at which you can receive affordable financing will vary depending on a number of factors. According to MSN, a person may be able to receive financing in as soon as several years after the declaration.
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Considerations
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A number of different factors will affect the amount of time it takes you to receive a car loan. For example, if you take out new loans and pay them back on time soon after declaring bankruptcy, such as through the use of a secured credit card, they will likely improve your credit score faster than by simply waiting for your credit to improve. Secondly, the state of your credit score before bankruptcy will also affect your ability to receive credit afterward.
Warning
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Technically, you can generally receive some kind of financing on a car in the months immediately after declaring bankruptcy. However, the rates will be extremely high. According to MSN, a person applying for loan can expect to pay more than 20 percent in interest payments. However, with improvements, this number can drop by almost half after a few years.
Solution
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According to Financial Web, there are a number of actions that borrowers can take to induce lenders to offer more reasonable terms for car loans, in spite of their bad credit rating. This includes using a co-signer on the loan, securing the loan with additional assets, placing a large down payment on the loan, providing character statement attesting to your ability to pay, and providing proof of income.
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