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Can You Get a Car Loan After Declaring Bankruptcy?

Tips for Getting an Auto Loan After Going Bankrupt

Filing for bankruptcy is a difficult moment for anyone that may experience it. Shopping for a vehicle after bankruptcy can feel even more challenging. While securing an auto loan after going bankrupt is rare, some applicants may still be able to qualify for a car loan. Here are a few tips to increase your odds of getting a car loan after declaring bankruptcy.

Understand Which Bankruptcy Type You Filed

Did you know that the bankruptcy type you select can affect your odds at a car loan? There are two types of bankruptcy that individuals can file for: Chapter 7 and Chapter 13. Chapter 7 is the type that is most chosen among those that file for bankruptcy. With Chapter 7, debts are not repaid. Rather, some or all of the individual’s possessions are repossessed and liquidated while some other debts may be wiped. Chapter 7 bankruptcies often take a few months to complete and will remain on credit reports for 10 years following the filing.

Chapter 13, on the other hand, will reduce debts and still require the filer to repay. This is often done with a repayment plan in which the creditors are given distributions of the payments. Those that choose to file for Chapter 13 bankruptcy can expect the process to take around 5 years and see the bankruptcy remain on their credit report for 7 years. While Chapter 13 takes longer to complete, a major benefit of this option is that the filer retains their possessions.

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Save Up for a Down Payment

Next, you should save up for a down payment. Each month, add some of your extra income to a savings account dedicated to your next vehicle. The more you save, the better chances you have at getting qualified for a car loan. If you still have your current vehicle and would like to sell it, consider offering the car on top of your down payment as a trade-in.

Get Pre-Qualified Before Shopping

Before you begin shopping, you should get pre-qualified for your car loan. By getting pre-qualified first, you can save yourself a lot of time that you would’ve normally spent browsing vehicles that may have been out of your budget.

[ READ MORE: What is Considered Good Mileage for a Pre-Owned Car? ]

For more tips on buying your next car, visit the U.S. Auto Sales blog. If you are ready to see how much you qualify for, apply for pre-qualifications at U.S. Auto Sales online.