Repossession is a situation where the lender repossesses the car from the borrower due to inability to pay or due to default in payment as at when due. Repossession is an unpleasant situation that may happen due to several reasons, some of which can be self-inflicted or as a result of unexpected occurrences in the form of disaster. However, this is not to say that you cannot get a car loan after repossession, as a matter of fact, it is an opportunity to come back stronger and get in control of your finances one more time. There are ways and strategies to go about this and this is what we will be looking at in this article. Let’s consider the following six steps to get a car loan after repossession.
Know and Understand your Credit Situation: The foundation of getting you financial back is to know where you are and this is how you will know what you need to arrive at where you want to be. Hence, the first thing to do is to request for your credit report from the relevant credit agencies, check for errors, and dispute them where necessary. You can get your credit report for free. Depending on when you experienced the repossession, if you have improved on your spending habit and timing of paying your bills, chances are your score may have improved before you apply for another loan. A good credit will work in your favor because you will be able to get loans at a lower interest rate.
Build Your Credit: One thing to do after repossession is to build your credit score over time so that your chances of being approved for a car loan would have increased. To improve or build your credit score, you need to pay your bills on time, do not exceed your credit limit, keep a long credit history, pay your loans on time, keep your debt profile low, and do not apply for credit you do not need. All these will help you to build your credit score. Also, while you do all these check your credit report to make sure all these timely payments reflect on your credit report.
Add a Cosigner or Co-borrower: A cosigner is someone with good credit and willing to stand for you to pay off the debt in case you default or fail to pay your loan. The cosigner has no rights to the car but is only obligated to the loan. On the other hand, a co-borrower is someone who cosigns the loan with you to pay part of the money as a means of sharing the burden of the debt. The co-borrower has rights to the car and his or her name can be on the title of the car.
Make Significant Down Payment: Another thing that will work for you is to save enough to make a sizeable down payment. This will help to keep your loan amount low, keep your interest rate low, your monthly payment is also reduced, and you can go for a good vehicle of your choice.
Go for What you can Afford: Avoid going for a car that is beyond your means in order to keep your loan amount low and shorten the loan term as well.
Choose the Right Lender: Apply with a lender that caters for customers of all kinds of credit profile including poor credit and make sure this lender is working in your best interest before signing the dotted line.