By Bradley Songer on November 9, 2010
Step 1: Do you really need a new car?
.jpg.aspx?width=75&height=75) Do not attempt to buy a car unless you absolutely have to. If your current vehicle is working and does not require repair, leave it. There are several other alternatives to rebuilding your credit other than car loans. However, car loans remain a great method to rebuild your credit after bankruptcy if you require a new vehicle.
Step 2: Pay cash
Paying for the vehicle mostly in cash will repair your credit after bankruptcy to a larger degree than obtaining a big loan. Try to save up money for a used car that does not require intense maintenance. Achieve this by creating a budget and not spending money on optional items.
Step 3: Buy an inexpensive car
Since you have experienced bankruptcy, lenders will be a little wary of your credit history, understandably. Therefore, interest rates may be as high as 20%. Because of this, it is wise to buy an inexpensive car so that interest remains low and that you can afford to pay for the car on time each month.
Step 4: Choosing a loan
Pick a loan that will allow you to make early payments without being penalized. Attempt to negotiate the price of the car down as much as possible. Since most car dealers sell vehicles with their profit margins well thought of in advance, it is usually pretty easy to negotiate a car down from its original price.
Step 4: Reestablish your credit
Make sure to pay the payments for your car loan on time every single month. This will cause your credit score to increase and you will be able to capitalize on cheaper loan rates in the future.
Step 5: Refinance your car after 6-12 months
As your credit score becomes repaired, the rates of the car loan for the refinanced car will decrease and save you money. Because interest was originally applied at 20%, it’s possible that refinancing may decrease your loan to much as half of your present loan rate.
Step 6: Look for other available options
If you cannot find a dealer to offer you a car loan due to your recent bankruptcy and resulting financial state you can try to obtain a secured car loan. A secured car loan is not based around credit; in fact, it is based upon the collateral that you put up equal to the borrowing amount. After 6-12 months you may refinance to acquire a better rate. |