How to Get a Car Loan After a Repossession

A car repossession is a serious credit mishap, which can stay on your credit report for seven years. However, having a vehicle repossessed isn't the end of the world. In fact, it's possible to finance a new or used car in the near future.

Instructions

Difficulty: Moderately Challenging

1. Wait at least one to two years before financing another vehicle. Rather than immediately apply for a new vehicle loan, give yourself time to rebuild credit. Besides, applying for a new loan after a repossession results in a ridiculously high interest rate.
2. Apply for new lines of credit. After a repossession, it's imperative to re-establish credit and prove your creditworthiness. Apply for a secured or unsecured credit card. Keep your balance low, or pay off the full balance each month.
3. Pay off the repossession balance. Once a lender repossess your car, they'll auction off the vehicle to pay the loan. In most cases, the sell price isn't enough to pay the full balance, and you become responsible for the remainder. Before applying for a new car loan, make arrangements to pay off any fees owed.
4. Explain the reason behind the repossession. If illness, temporary disability or loss of employment contributed to the vehicle repossession, write a short remark--less than 100 words--explaining the situation. Have the credit bureaus attach the note to your credit report.
5. Contact at least three high risk auto lenders. High risk or sub prime auto lenders are prepared to give you a loan after a repossession. Still, it's important to get the lowest rate possible. Use an auto loan broker or contact individual lenders. Get a no-obligation quote and compare rates.