Auto Financing
After Bankruptcy
Some car buying questions from Grace H. in Florida...
About auto financing after bankruptcy for her & her husband.
My husband & I filed bankruptcy over 4 yrs ago. He is now starting his own business and I have been working for the same company for 8 years. I wanted to ask 2 car buying questions...
First, can we get financing for a car? Secondly, I do not drive but can I be a cosigner for him since he will not have income documentation?
Thank you with any help and any tips for buying a car after BK you can give me.
Answer:
Hi Grace,
The simple answer to both your questions is yes. You would both be able to obtain auto financing after bankruptcy.
Your financing may come with some very tough terms which may limit your vehicle selection, may require a large down payment, will have high finance charges (20% +) and may only allow for short term financing (48 months or less).
That's worst case scenario however...
All that being said, it does not mean you will only get approved for that type of financing, but there are many other variables that I am not aware of that will greatly impact your chances of a better approval.
What have you done for m̶e̶ you lately?
First, the bankruptcy is not "that" terrible and the fact that it is 4 years old certainly helps, but what's been done to rebuild after the BK? The more the better and you may even find a local credit union that would approve your auto financing after bankruptcy in this case (this would be your best bet).
In addition, have there been any negative accounts after the BK? If so, this, especially in today's economy, can greatly hurt your chances of a better approval.
Self employed
The other thing that will limit your auto financing after bankruptcy options is your husbands self employed status. Lenders usually like to see a two year self employed history and will frown on self employed applicants with major derogatory credit, but again this is where what's been done since the BK will have more of an impact.
No drivers license
The last item that may hurt some is you not having a drivers license as lenders will usually want the primary borrower (even though this will be a joint account, you'll be primary most times because you have the income) to have a license, but this is not always mandatory.
My advice...
My best advice and tips for buying a car after BK to you would be to check your credit and be sure there are no negative accounts reporting after the BK (you may not even know they are there), or there are no accounts that were included in the BK that are not reporting as such. Click here for your Free Credit Score
and take a look at what is there.
Now that you've checked and reviewed your credit file you'll want to contact a local dealership and before you allow them to pull your credit explain the circumstances of your situation and see if they feel they can help.
I would suggest speaking with someone in the finance department as they will certainly know more about what can be done than a salesman who might tell you whatever you want to hear to get you down to the dealership.
If they feel that they can help you set up a time to meet with them at the dealership and review the credit bureau you pulled yourself. Once again ask if they feel they can help. If it's still a yes, then you can let them go ahead and move forward, but I'd recommend that you only allow them to send your application to roughly 3-4 banks.
If they are not able to help you, then you don't want to rack up a bunch of credit inquiries which might limit your chances down the road once this economy turns and either you have your license back and/or your husband has more time under his belt being self employed.
Last point here is that down payment will greatly increase your chances of a better approval as a larger down payment limits a banks risk and therefore translates into a better approval for you. This is especially true when it comes to auto financing after bankruptcy.
Hope this helps and good luck to you,
Justin
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