Auto financing is considered by a lot of people as a good means to improve credit score. These are a form of secured loans, as the car is a collateral with the lender till the money is not paid back. In case the borrower fails to pay it back, the car is taken by the lender and can be resold to recover the money. This makes the approving process a little relaxed, thereby encouraging bankrupt or poor credit history individuals to go for it. Also, as the individual keeps making payments for the borrowed amount, his credit score starts improving, and he starts his journey towards financial recovery.
Obtaining Finance After Bankruptcy
The best option left with them is a bad credit car loan. Its peculiarity is that the interest rate charged is higher than what is normally prevalent in the market. However, the primary reason why this type of loan came in existence is to provide bankrupt individuals with finance when needed. Money lenders providing finance under this category also cater to individuals who have had a mortgage foreclosure, have poor credit scores, or a bad credit history.
The two types of lenders into the business of providing such loans are:
He issues loans at a higher interest rate, in comparison to the current interest rate prevalent in the market. This is because the borrower has a poor credit history, and the chances of him defaulting are also comparatively higher. The interest rates are not exceptionally high and normally affordable by most people.
He works differently from normal money lenders. There are no identity or background checks carried on individuals, prior to lending them money. This is not the case with sub-prime lenders. Due to this, interest rates are the highest and so are the chances of defaulting payment. Since there are no background checks, a hard-money lender can ask for collateral before lending the money.
As lenient as these lenders are, it should be noted that individuals having a credit score under 500 will have less chances of getting loans from these places. It becomes eminent for the individual to do a credit repair first and then start looking for auto financing. Getting a secured credit card is considered to be one of the best ways of improving your score.
This is important because it helps the individual to determine how much amount he will be able to pay per month, in order to repay the borrowed amount, along with the interest. Before applying for a loan, do a calculation based on your monthly income and expenditure, and then select the most feasible finance option from the available choices.
Visit an Auto Loan Lender
There are sure to be some number of such lenders in the city, who specialize in helping the people who have gone bankrupt or have a bad credit history. Find out these professionals and approach them to borrow money. This is a better option than visiting any local auto dealership.
Go Through Credit Report
Any individual looking for auto financing in such case should ideally go through his credit report and ensure that all accounts and finances are in place. Adding an extra page explaining reasons and causes of bankruptcy to the credit report is not such a bad idea. This gives the lender an opportunity to lower his interest rates, in case he finds the reason genuine enough.
After getting a loan, the individual should constantly look for the latest such options. This is useful as it can reduce interest rates, provided that the individual has been paying bills on time, and his credit score has improved over a specified period.
Thus, all in all, this is not a difficult process, and a lot of bankrupt people get these loans very often. There are numerous programs and institutions dedicated to help such individuals to come out of their financial slump, and hence, you need not worry about it.