If you are on the road to recovery after having declared bankruptcy, you can improve your credit by applying for a car loan. Getting a car loan is one of the best ways to rebuild your credit after bankruptcy, dealerships make the process easy, even for those who may not have good credit to back them up. Through the process of applying for a car loan you are able to improve your initial credit, choose the right vehicle, and secure a down payment as you partner with a dealership to get you back on the right track.
Low Risk Investment
When you come back from bankruptcy and wish to begin rebuilding your credit, dealerships can partner with you. Dealerships are able to offer car loans to those who have bankruptcy on their record because car loans are low risk. The reason these loans are considered low risk are two-fold, one is the confidence that people will make their payments as they rely on their vehicle and two if the payments cannot be made the car can be repossessed and the money is recovered. Car dealerships can then confidently take the risk and offer you the loan.
Rebuild Your Credit
The first step that you may want to take in applying for a car loan is to begin to rebuild your credit by obtaining a secured or unsecured credit card and acquiring some payment history. Keep your purchases small and pay your balances each month to achieve at least six months of good credit standing. If you complete this step before applying for a car loan, you are sure to achieve a better deal.
Choose a Realistic Vehicle
Choosing the right vehicle will also help you in being approved for a car loan. You want to keep things balanced when selecting a vehicle, as you need to take into consideration how much you can afford to spend on a monthly payment for a vehicle, while also keeping in mind that investing in a vehicle that is of better quality will save you in the long run. Less-popular car models are often a good place to start, as long as they have good mechanical and safety reviews. These vehicles often come with a better deal as dealerships and manufacturers will offer incentives and work hard to get you financed if it means moving an unpopular car off their lot. It can sometimes be wise to select a “Certified Pre-Owned” vehicle, rather than a brand new model, as they often come with a balance of the original vehicle warranty and sit at a friendlier price.
Save a Down Payment
If you are able to save a down payment, before coming in to apply for a car loan, you are more likely to be approved. The value of a new car drops significantly after it has been purchased, as it looses its “new car” status. If you finance the full amount of the vehicle, as you drive away, the vehicle may become worth less than the amount you owe, taking away from the lender’s security if they need to repossess.
Watch Your Credit Improve
Once you have acquired a car loan, it is important that you make your payments on time. Doing this consistently for a couple of years can significantly improve your credit after bankruptcy and get you back on the right track to financial freedom.
Speak to someone in the Financing Department at Sherwood Dodge today and let us get you behind the wheel of your next vehicle.