California residents in Chapter 7 bankruptcy may wonder if they can obtain car loans later. Here’s what you should know about getting a car loan post-Chapter 7.
How does bankruptcy affect your credit?
Chapter 7 bankruptcy allows some property to be liquidated so that you can repay the debt you owe to your creditors. Other debt is discharged through bankruptcy. After a discharge, the bankruptcy remains on your credit reports for up to 10 years.
Can you get a car loan after Chapter 7 bankruptcy?
Chapter 7 bankruptcy on your credit report will lower your credit score. Opening a new credit account can also cause your credit score to dip, making it more difficult to secure a car loan. Lenders will see you as a risk for repaying. Although some lenders extend loans to borrowers with poor credit or who recently filed Chapter 7 bankruptcy, interest rates are high.
Despite these issues, all hope is not lost. There are things you can do to get a car loan with bad credit after Chapter 7 bankruptcy. You should get copies of your credit reports and thoroughly review them. If you spot any mistakes, immediately report them to the credit bureau to have them fixed.
You can gradually rebuild your credit. Pay all your bills on time and in full. You might want to pay more than the minimum amount to help things along faster. Over time, with responsible usage of your credit, you will notice your score improving. You may want to sign up for credit counseling and a new, secured credit card.
Saving money for a down payment toward your car loan is a good way of improving your chances of getting approved. You may even get a lower interest rate. You should also study several options of car lenders once you’re ready to begin shopping for a car. It can take time to get the best car loan for you after bankruptcy, but it’s possible.