Some car buying questions from Tammy B. of Toronto, ON...
Car loan after bankruptcy has caused problems and is getting frustrating.
My name is Tammy. I'm thrilled to have found your site, but I think I might be a little to late.
I had to claim bankruptcy in 2006 due illness. I don't have a medical plan at work which left me no choice but to use credit for medications prescribed to me. Before this action, I looked into "consolidating" my debts. The company was fraudulent which added to my dilemma. I have been discharged since May 2008.
I have realized we are not treated as individuals where credit is concerned and a car loan after bankruptcy is more difficult to get than I had expected. All my past vehicles were paid perfectly. My biggest problem is an error made by GMAC Auto Finance back in 2008. All I can say about GMAC is I am a good example of why they are in the predicament they are in.
I had no clue what I was up against trying to purchase a new vehicle, I have wasted a lot of time and I'm getting no where fast!
Please help me along with getting a car loan after bankruptcy. I have been denied loans, gone through dealers etc. etc. Your site is amazing and very helpful, yet I don't know how to proceed from here.
I refuse to pay over $14,000.00 dollars in interest for a used 2000 and something vehicle with 60 to 80,000 kilometres on it, that isn't even worth $14,000.00 dollars. I'm not that desperate or stupid.
Life threw me something unexpected, which I dealt with the best I could. I don't think I should be severely ripped off because of it. (Just a little like everyone else). I'm not sure anymore if I'm being realistic with my situation and credit history????? Your advice on how to get a decent car loan after bankruptcy is much appreciated.
I'll do my best to help. Unfortunately, there are some variables to your situation that I don't know, so I'll do what I can with what I've got.
Getting a bad credit car loan after bankruptcy should not be as difficult as it has been for you, which makes me wonder if you've been working with the right dealerships.
That being said, you could have been working with the right dealerships, but things like negative equity in a trade in, the situation with GMAC Auto Finance, other delinquent accounts after the bankruptcy, etc. could be having a very limiting effect on what you are able to do and what kind of car loan after bankruptcy you are able to get.
Unfortunately, the current state of the economy in United States has a major impact on what is going on in the world and I'm sure has had an impact on what Canadian auto lenders will and won't do these days with regards to a bad credit car loan after bankruptcy.
This may not necessarily be what you wanted to hear, but it is what I feel is ultimately going to be the most beneficial for you since you are not desperate to buy and are obviously very well aware of how a high interest rate can drastically affect the true bottom line cost when buying a car and financing.
This is actually a four step recommendation and if you have the time, then you should find that things will be much easier the next time around.
You'll want to know what the car dealers and lenders are looking at when they review your credit report and FICO score...There may be more that needs work than you may think and it may be affecting what credit tier you fit into.
I'd first recommend that you review your credit file and score to know where you stand now and exactly what it is that is holding your credit back. Take a look at CreditReport.com and get your Free Credit Score!
Dispute that GMAC account (easy to do online once you've gotten your report) and any other inaccurate information. If you find there are accounts reporting that should have been included in your bankruptcy, but are reporting as open, then dispute those as well.
As for legitimate accounts that were not included in the bankruptcy, then you'll need to settle those. I'd recommend reading my Collection Removed page for help there.
If you haven't already started to rebuild, then I'd recommend getting to work on that as soon as possible. Yes, rates will be high, but you'll need to start over. You don't need to rush out and get a credit card for $5,000, but a $500 card...You won't have to keep it forever, you'll just use this to get the credit ball rolling after your bankruptcy.
Second half of this step is to give it a little time, like 12-18 months. It may not take this long, but I don't know your exact situation and would rather err on the side of a longer time frame. Work on settling bad accounts and work to get some new well paid accounts.
Save up some money. I'm not sure what you were using for a down payment in your current situation, but the more the better when applying for bad credit car loans.
Is down payment always necessary? No. But it helps to lower rates (better, safer loan structure for the auto lenders) and gives you more options as to what type of car you can buy.
I'd recommend no less than $1,500, but again the more the better.
If you've followed these steps and really worked to get your credit in good order, as well as saved up a nice down payment, then I'd recommend applying for your now "not so" bad credit car loan through a credit union.
It's not guaranteed that you'll get approved, but if you look for a car that is in the $10,000-$14,000 range and have a $2,000 down, then a credit union will be your best bet for a decent approval. Depending on your credit score at the time, your rates could be in the 8-14% range.
Ultimately, you'll want to keep in mind that buying a car after bankruptcy is like starting from scratch and you'll have to crawl before you walk and walk before you can run!
I hope this has helped to shed some light on bad credit car loans and how you can get the best car loan after bankruptcy, but if not, then please don't hesitate to let me know and I'd be glad to give you more guidance. By the way, a well paid car loan is one of, if not the best ways to rebuild after a bankruptcy. Justin
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