Submitted by Rachel R on Mon, 11/18/2013 - 10:48pm
If you’ve recently filed a bankruptcy there will be some limitations on your ability to get credit for a short time. In some cases, this can cause you issues. What happens if your car breaks down? Sure, if you’ve got a pile of cash in the bank you can just go out and buy one. But for most people, that’s not the reality. Most of us would need a car loan to get a new ride.
We are often asked by clients how soon after bankruptcy they’ll be able to get new credit. The answer is that it depends. First, you should understand that bankruptcy is nothing to be embarrassed about when it comes to getting new credit. You should tell them up front because the lender is going to find out anyway as soon as they run your credit.
The best case scenario is to try and wait two to three years before applying for a car loan or a mortgage. This will give your credit score time to rebound. In the interim, you should start out by getting a secured credit card and then a low limit credit card. Taking out a small personal loan can be the next step. But these should be done to rebuild your credit, not as a source of funds.
Image soruce: Salon.com
Credit spending is a bad habit and one you don’t need to fall back into after bankruptcy so don’t get and use a credit card because you’re short on cash. Get a credit card, charge a small amount each month and pay it off in full or charge a utility on it like your cable bill and then pay it off completely. If you take these steps first and reestablish your credit, you will get a better deal on your car loan.
If you absolutely can’t wait you can still get an auto loan, but it will likely result in a higher interest rate on the loan. Many dealerships specifically advertise that they give loans to those in post-bankruptcy and these are the dealerships you’ll likely have to deal with. If you bank with a credit union, they may work with you and offer you a better rate than a sub-prime dealership.
You may get a better deal if you can get a family member to make you a loan. Offer to pay them reasonable interest, write up a contract and you can even put a lien on the title as a guarantee so they can keep the car if you fail to make your payments to them. This can be a win-win for you because you get a car and your friend or family member because they’ll earn some interest.
Image source: SDCarLoan.com
If this isn’t an option – it’s off to a car lot with you. Do not go to a buy here-pay here lot. The interest rates at these establishments are typically usurious (i.e. monstrously high) compared to the rates at a dealership that offers programs to reestablish credit. Plus you’ll get a newer car likely with a warranty. Other tips are to purchase a late model used car rather than a new one, purchase a lower end car without bells and whistles and look for the best deal based on Kelly Blue Book value.
If you’re deep in debt and wondering if bankruptcy would be an effective option for you, contact the law offices of John T Orcutt for a free consultation on North Carolina bankruptcy.
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