You have survived bankruptcy and now you are ready to begin rebuilding your credit history.
In this article, we will talk about how you can acquire a bad credit car loan and use it as a stepping stone towards good credit.
Check your credit report.
Before starting your search for a good car loan deal, order a copy of your credit report from the three major credit bureaus. See to it that you will be starting your record clean and free from errors. In case there are details in your report that needs to be corrected, send a letter to the bureau that issued your report right away.
It is a good idea to include a letter of explanation with your personal credit report. This way, a potential lender who will be evaluating your credit will be able to understand the circumstances behind your recent bankruptcy. It can make a big difference in getting your loan approved. Take note that this service isn’t free and the credit bureau may charge an extra cost for including your letter to those who will request your credit report.
Plan your repayment.
Have you decided on the loan amount you plan to borrow? What type of car do you want to purchase? It might be tempting to apply for a higher loan amount or to purchase a more expensive car but don’t forget to consider if you can afford the monthly loan payments.
Furthermore, bad credit car loans tend to start with a higher interest rate than standard loans, so you end up spending a lot more on the interest rate fees alone. If you dream of a better car, it would be better for you to do so when you have managed to improve your credit standing. In the meantime, a cheaper car that serves your purpose is a more practical choice.
Compare loan quotes.
Check out car loan lenders that offer special programs or bad credit financing for people who have been discharged from bankruptcy. The quotes you will get are only estimates, not the exact deal so always be ready for a negotiation.
Take note that some lenders have strictly “NO Bankruptcy” policy. If you send your application to the wrong lending company, your application will surely be rejected and your credit score will be hurt even more.
Refinance your bad credit car loan.
Once you get approved for a car loan, be sure to submit all your payments on time. Remember, you can significantly improve your credit score through prompt payments. After a year, check your progress and if your score has improved, consider refinancing your car loan to enjoy a much lower interest rate.