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Bankruptcy Auto Loan
By John Preston
Being recently discharged from a bankruptcy means many things. You've got a clean slate and a second chance to do things the right way. You can finally hold your head high instead of trying to hold your head above water. And, you are probably conducting a lot of research on what you can do to make your credit count.
In this article I'm going to tell you about one of the best things you can do to get your credit back on track. A bankruptcy loan is the way to go if you want to build long-term credit,. Why? First of all, having been in financial distress for so long, your vehicle has gotten older and probably needs more repairs than ever. Secondly, getting a bankruptcy loan will give you a solid foundation on which to build your credit, paving the way for larger loan requests in the future.
The most important thing to do before going to your nearest car dealership is to know how the lender will calculate your monthly car payment. Most lenders won't allow you to spend more than 15% of your gross monthly income toward a vehicle. So you'll need to figure out how much you can afford, and then save for a down payment. It might take awhile, but will be much easier if you open a savings account and deposit a small portion of each pay check. Trust me, you won't miss it and sacrificing
one or two take-out meals a week will be well worth it when you are driving down the highway in your new car!
Second, it's vital that you do not keep your bankruptcy loan for longer than 12 months, regardless of the type of vehicle you buy or the interest rate you get. Going past the 12 month point can actually end up costing you a bundle in interest payments, moving you away from your goal which is to save money and build your credit.
Make your car payments on time each and every month. No excuses! Then after 12 months visit your bank or credit union and ask them to refinance your loan. You will be amazed at how much this will lower your monthly payments.
So how does getting a bankruptcy loan benefit you in the long term? Simple: every payment you make will be reflected somewhere on your credit report and shown to other banks or lenders to whom you apply for future loans. That's why it's so important that you make every single payment on time. Plus, other lenders will see that another bank granted you a loan, even with a recent discharge on your record. This will make new lenders less reluctant when you come to them for a loan. Basically, you will be considered a low risk to them. Before you know it, you will have increased your chances of securing loans from other banks tenfold.
A few things to consider: you might be tempted to purchase a vehicle privately instead of going to an dealership. This tactic might cost you less initially, but if your vehicle ends up having expensive problems down the road, you could be shelling out an awful lot of money at once that you can't afford to spend. That might mean putting repair payments onto a credit card, which could begin the debt cycle all over again should you lose your main source of income.
Purchasing a vehicle privately can also cost you time; you could be spending more hours trying to locate the vehicle than actually looking at one. And, if you're in a hurry, you're more likely to miss those 'red flags' and dismiss what the previous owner considers to be 'minor repairs'. Also, a lot of vehicle owners will be looking to transfer their remaining vehicle loans onto the new owner. This will end up costing you more run-around time and more paperwork between financial institutions, which can get frustrating if you need a reliable car sooner than later.
Take my advice: get a bankruptcy loan, pass go and head straight to a car dealer. You'll get better gas mileage and a more reliable vehicle with fewer secrets hiding under the hood.
Join the Credit Is Key membership website and receive a FREE e-course to use our proven strategies to rebuild your credit and your life after bankruptcy. Click now to rebuild your
bankruptcy auto loan
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