Bankruptcy, Debt Consolidation :: How To Get A Car Loan After A Bankruptcy

How To Get A Car Loan After A Bankruptcy

When you file for bankruptcy, a lot of people will tell you that re-establishing credit will take years. They'll also warn you that you'll be unable to buy anything on credit for a long time, and that your credit history will be permanently damaged.

This is NOT true.

The truth is, if your bankruptcy is discharged, re-establishing credit can be done in as little as twelve months. As long as you know how the US credit system works, you can restore your credit quickly and painlessly.

1. Make a plan.

It's important to have a budget and a savings plan before you start re-establishing. You have to have savings to get re-established quickly, and you'll need discipline to follow a budget and save. When you come up with a plan make sure you follow it. Also, creditors will probably send you bills for debt that was included in your bankruptcy. Make sure you take the time to inform these creditors their debt was included and provide them proof. If these creditors accidentally file a collection against you it can really slow you down.

2. Start hoarding.

This is the hardest part -- you need to save up a few thousand dollars. Mostly, this money will be your emergency fund that you can use to make payments if you have a problem. But some of this money will be used to get a secured credit card and for a vehicle down payment. You also need to keep all of your important financial documents like pay stubs, bank statements, bills, etc., because a creditor may ask for copies in the future.

3. Time for a secured credit card.

Secured credit cards are a great way to get your credit back on track. Just make sure you don t use them more than once. That's right, get a secured credit card but use it only once. Pay it off the first month you get a bill. Once that first payment is made on time, the credit bureaus will report that you're making payments. Then destroy the card. Even if the card is no longer being used, the credit bureau will still show that you're making payments on time and you will be building credit.

4. Buy a car.

Choosing an inexpensive pre-owned car is the easiest way to get approved for a loan. It's also the best car to buy if you plan on trading it in within the next year. Ideally, you would buy a cheap car and then trade it after 6 to 12 payments have been made. This way, you'll get credit but you don't have to keep the car forever. By going used and cheap, you'll lose less money when you trade it in.

5. Apply for more credit.

Now that you have a secured credit card and a car loan that you've been making payments on, you have enough credit to get some low limit national credit cards (like Discover, Visa, MasterCard). Make certain that the cards you apply for do not have an annual fee, and you should also look into getting a credit card from your local credit union. Whatever you do, remember that if your application is denied you need to call and ask WHY. Often times you can convince a credit card company to approve a declined application with a little persistence.

6. You can now get the car you want.

The end is here. You've done everything right, a year has passed since your bankruptcy discharged, and your credit is now re-established. You can get the car you want.

While re-establishing credit after a bankruptcy is fairly easy, it's also easy to slide back into a bad credit pattern. Make sure that you are always saving money -- if you have savings, you have options. Also, take a look at your life and your spending and compare it to your habits before you filed bankruptcy. Are you doing some of the same things as before? If so, make a change. While re-establishing after your first bankruptcy is simple, re-establishing after a second is very difficult.

By: Jason Lancaster

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Author Jason Lancaster has nearly 10 years of experience in the auto industry. He's helped hundreds of people get a car loan after bankruptcy and knows how the credit system works for bankruptcy car loans.
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