Car Loan After Bankruptcy: Qualifying & Saving Money

Posted by Nick Niesen on October 29th, 2010

If you are planning to apply for a car loan after bankruptcy, there are two key items you need to focus on:

1) Increasing your chances of qualifying for a car loan after bankruptcy

2) Reducing the interest rate on the car loan after bankruptcy

Let's look at each item in more detail:

1) Increasing your chances of qualifying for a car loan after bankruptcy

One way to increase your chances of qualifying for a car loan after bankruptcy is to increase your credit score.

How do you increase your credit score? One way is to update your credit reports. This means removing any inaccurate or obsolete negative information from your credit reports. This will take an investment of time on your part - but if it means the difference between qualifying (or not) for a car loan after bankruptcy it can be worth the effort.

Another way to increase your credit score is to add positive items to your credit report - but few people know about this technique. There's not enough room to go into it here, so I'll save that for another article.

In After Bankruptcy Credit Solutions I go into detail on a number of ways you can increase your credit score. While there isn't enough room to cover all of them here, or any of them in detail, hopefully this gives you an idea of some of the steps you can take.

Another way to increase your chance of qualifying for a car loan after bankruptcy is to increase the amount of your down payment, or look at a lower price car.

For example, let's assume you have $1,600 for a down payment on a car and you're looking at a $16,000 car - that's a 10% down payment. But what if the lender won't approve the loan because the down payment isn't large enough? See what they can do if you consider an $8,000 car. Now your $1,600 represents a 20% down payment. In addition, everyting else being equal, the payment on your car loan after bankruptcy would be lower if you finance it for the same period of time.

Next, let's discuss some ways you can reduce the interest rate on a car loan after bankruptcy...

2) Reduce the interest rate on the car loan after bankruptcy

Here's where increasing your credit score pays off again! Why? if you are able to increase your credit score enough to reduce the interest rate you pay on a car loan after bankruptcy, you could save $100s or even $1,000s of dollars.

For example, let's use a $15,000 car loan after bankruptcy as an example. Let's say you increase your credit score enough so that you receive an interest rate of 11% instead of 14%. Over the life of the loan you will end up saving about $1,067 in interest - that's money that stays in your pocket!

There are other ways to lower the interest rate on a car loan after bankruptcy - increasing your credit score is just one of them. For example, there's another technique you can use to reduce the interest rate you pay on a car loan after bankruptcy - and it can save you up to $100s of dollars (or more). There's not enough room to cover it here, but it's a powerful technique if you don't have time to increase your credit score, and need to finance a car immediately. I go into detail on it in After Bankruptcy Credit Solutions.

Now you know some specific techniques you can use to increase your chances of qualifying for a car loan after bankruptcy, as well as potentially reducing the interest rate you pay in the process!

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