A Chapter 7 bankruptcy may be on your credit report for as long as 10 years after when it was filed. You may need to get a car loan during this time. While it’ll be more difficult, it’s still doable if you make a larger down payment or you’re willing to pay the lender a higher interest rate.
Is it a good idea to buy a car after a Chapter 7 bankruptcy?
This really depends on your transportation needs and financial circumstances. One of the main considerations is whether you have transportation that you can rely on. If you do, you should wait to buy a car since the interest rate won’t be ideal. However, if you do choose to buy a car after a Chapter 7 bankruptcy, make sure that it’s well within your budget (remember to calculate the cost of ownership, not just the sticker price).
How can I finance my car?
Unfortunately, getting a car loan after you’ve filed for a Chapter 7 bankruptcy will be more difficult. Not only will you struggle to find a lender since many of them won’t want to try to help you, but once you do find someone who will give you a loan, you may not qualify for a favorable rate. If you’re willing to deal with high-interest rates on your loan, then there are a few places where you can find a lender to work with and a vehicle that’ll fit your needs.
Buy-Here, Pay-Here Dealerships
As you search for a way to buy a car after having filed for a Chapter 7 bankruptcy, you may come across these dealerships. Regardless of your credit, these dealerships will work with you. However, you’ll pay more than what the vehicle itself is worth because of the fees that are associated with buying a car here.
If you belong to a credit union, you may want to apply for a loan with them. Since these are nonprofit organizations that are owned by their members, it may be easier for you to secure financing through them. You may even get a better interest rate.
Another option you may wish to consider is having someone who has really good credit co-sign for your car loan. Before you choose to do this, you’ll want to make sure that your co-signer understands their rights and responsibilities because if your loan is defaulted on, they must make the payments. If they miss these payments, it can impact their credit negatively.
When should I take out a car loan?
The best time to purchase a new vehicle will depend largely upon your financial circumstances. However, you’ll want to take the time to look for the best interest rate possible. This is why it’s a good idea to wait until you have a better credit score (doing so reduces the interest rate offered to you by a lender), but when this isn’t possible, you should do your due diligence by taking time to shop around a bit.
It’s also important to note that throughout the pandemic, some car manufacturers had to close their factories for an extended time. This led to a decline in sales. Therefore, if you need a vehicle, it’s a good idea to shop for a used one. Regardless of anything else, the bottom line is that you should never take out a car loan that you can’t pay back.
The Bottom Line
Ultimately, when you take out a car loan after your Chapter 7 bankruptcy, you should expect to pay a higher interest rate. Of course, in time, your credit score will improve, but waiting isn’t always an option. To determine what the best option for you is, contact us at the Weller Legal Group in Tampa, FL, today.
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