Car loans after a bankruptcy is one of the first secured loans you will qualify for. Not only will you obtain transportation with a car loan, but you can also rebuild your credit. The following three facts will help you get the best financing deal.
1. Seven Years Doesn't Mean Seven Years Of No Credit
Bankruptcy doesn't mean that you can't qualify for credit for seven years. After a few months of reestablishing your credit, you can apply with a subprime lender for vehicle financing. With a good credit record of two years or longer, you can look at conventional lenders.
Subprime lenders work with non-traditional borrowers. With their slightly higher rates, they can offer a variety of financing options to people with all sorts of credit records. Conventional lenders also look at people with bankruptcy once they have regained a good credit score.
2. Lenders Offer Different Rates - So Compare First
Lenders offer different rates from the market index. By comparing the APR, which also includes any fees, you can find the lowest costing loan. This doesn't always mean the lowest interest rate.
Another way to reduce your rates is to increase your down payment to 20% or more. A large down payment reduces the risk of default, enabling lenders to provide better rates.
Rates also vary by the type of vehicle you purchase. New cars purchased from a dealership qualify for the lowest rates. But budget considerations, such as vehicle price, should also be considered in choosing your car's financing.
3. You Can Refinance Car Loans
Once you sign a contract for your car loan, you don't have to feel trapped by the rates. Today's lenders offer refinancing options for car loans. Even if rates go up, you may find that by improving your credit score, you will qualify for better rates in two years.
If you plan on refinancing, make sure that your current car loan doesn't have any early payment fees. Also, be aware that the majority of your interest is paid at the beginning of your loan. Waiting too long to refinance may not save you any money, so check the numbers first.
Reasonable car loan rates can be found by researching and planning ahead.
Carrie Reeder is the owner of ABC Loan
Guide, an informational website about various types of loans.
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