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How Long After a Bankruptcy Can I get an Auto Loan?

July 9th, 2013 · No Comments · Auto Loans, Bankruptcy

by Kristy Welsh

(Last Updated On: July 8, 2013)

Auto loans Q. I noticed you answered a question last week about how long it takes after a bankruptcy to buy a house. With that in mind, I’d like to ask you how long after a bankruptcy do you have to wait to get an auto loan?

A. Credit wise you can get a car loan as soon as the ink dries  on your discharge papers. Of course, you will be talking about interest rates in the neighborhood of 20% or even higher. What can you do to avoid such ruinous rates?

Reestablish Your Credit
The best thing you can do after a bankruptcy in general is to reestablish your credit. Like any other credit product, the availablity of loans is based on your credit score. One of the best ways to reestablish credit is by opening up secured credit cards. Some secured cards will accept customers who are fresh out of a bankruptcy. Others may require a 6 month wait. You want to start reestablishing credit right away since new accounts don’t really add points to your credit score until they are at least a year old.

Save Up Cash for a New(er) Car
Another option is to save up your money now before you need a new car. Even if you’re not planning on a new car right away, you will at least have some kind of cash on hand in case your current auto needs some repairs. If you can get by fixing your existing car, this save you having to buy a new one.

When it does come time to replace your mode of transportation, you should avoid getting a brand new car – buy a reliable used one. I’m sure I don’t have to tell you that cars depreciate quickly – you literally lose thousands of dollars as soon as you drive a new car off the showroom floor. There are many good reliable used cars on the market with low miles. Do your homework – don’t just buy a car on impulse.

Join a Credit Union You’ll need a place to stash that money you’re saving for a new car, and a credit union should be your first choice. Not only do you get friendly, personal service, but once you’re a member, you’ll find that credit unions have auto loans which have easier qualification requirements than a regular bank. Kill two birds with one stone: in addition to lower rates and relaxed credit for auto loans, credit unions have good secured credit card programs. Based on personal experience, I know they will sometimes offer unsecured credit cards to those who only have a couple years of good credit after a bankruptcy.

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