Getting an auto loan to purchase a car can feel like a hassle under any circumstances – and if you have a bankruptcy in your past, you’ve probably felt some fear and anxiety that you’ll never be able to qualify for a car loan again. Fortunately, it simply isn’t true that you can’t get an auto loan if you have filed for bankruptcy. On the contrary, many lenders are willing to work with borrowers who are rebounding from financial setbacks. Our Philadelphia bankruptcy lawyers offer five helpful tips for getting an auto loan after you have declared bankruptcy in Pennsylvania.
5 Tips to Qualify for an Auto Loan After Filing for Bankruptcy in Pennsylvania
Don’t assume that it is impossible to obtain an auto loan simply because you have filed for bankruptcy in the past. While bankruptcy brings some additional factors into consideration, it does not necessarily rule out the possibility of getting a car loan. By following these five tips, you can increase the likelihood of getting an auto loan during Chapter 13 or after Chapter 7 bankruptcy in Philadelphia. Of course, you should always speak with an attorney if you have any questions about filing for bankruptcy or how bankruptcy may affect your ability to purchase a vehicle.
- Plan the perfect timing. “How long after bankruptcy can I buy a car?” is a very common question for debtors to ask. While some lenders will agree to give you a loan almost immediately after you file, you should wait until your case has been discharged, or until you have been released from liability for your dischargeable debts, which usually takes about four to six months in Chapter 7. However, if you filed for Chapter 13, which takes anywhere from three to five years, waiting may not be practical. If you truly need to purchase a vehicle while you are in the process of completing a Chapter 13 bankruptcy – for example, perhaps because public transportation is not reliable for getting you to and from work – talk to your Philadelphia Chapter 13 attorney as soon as possible about filing a Motion to Incur Debt, which may allow you to take on additional debt while your case is in progress.
- Check your credit score. Bankruptcy will initially have a negative effect on your credit score, so you should get a clear preview of what your lender will see when he or she checks your credit. You are entitled to a free copy of your credit report once per year from each of the major national credit reporting companies (TransUnion, Experian, and Equifax). You can order a report by calling (877) 322-8228, or by requesting a credit report online.
- Even if you aren’t shopping for a vehicle, it’s still wise to check your credit score after bankruptcy in case your credit report contains an error.
- Start repairing your credit. Now that you know what your credit score is, you can get to work increasing it. While you don’t need to have excellent credit to get an auto loan, even having a few months of full and timely payments can help to convince a lender that you aren’t a major risk. Other than paying your monthly expenses like utility bills and your home mortgage or rent in full and on time, one of the of the best ways to build good credit after bankruptcy is getting a secured credit card, which is “secured” by a deposit you make.
- Save up for the down payment. The larger down payment you can make, the less financially risky it is for the lender, and the lower your interest rates may be. It’s helpful to make your down payment in cash, which can not only increase the leverage you have when negotiating with the dealership, but also help you save money by cutting out loan processing fees.
- Shop sensibly. Getting a new car is exciting, but you need to remain cost-conscious, especially when you’re shopping for a vehicle with a recent bankruptcy on your record. It’s a good idea to consult Consumer Reports for dependable ratings on vehicles in a price range you can accommodate. By doing your research, you’ll ensure that you get more bang for your buck instead of buying a model that may be cheaper up-front, but has more maintenance problems down the road.
Philadelphia Bankruptcy Lawyers Handling Chapter 7 and Chapter 13 Cases
While bankruptcy will initially damage your credit in the short-term, it can also position you to make your credit stronger than ever in the long-term. When handled strategically by a skilled Montgomery County Chapter 13 bankruptcy attorney or Chapter 7 lawyer in Montgomery County, bankruptcy can be your first step on the road away from bad credit and toward financial freedom. To learn about your bankruptcy options in Pennsylvania contact Sadek & Cooper Law Offices at (215) 995-2543 for a free legal consultation.