04.07.09
Bankruptcy Auto Loans
Bankruptcy Auto Loans
Bad Credit Auto Loans|Bankruptcy Auto Loans|Bad Car Financing
Before we get into how to get a bankruptcy auto loan we need to look at the different types of bankruptcies a person would file to get debt relief.
Chapter 7 – This type of bankruptcy allows a person to eliminate their responsibility for repayment of their debts public and private to secured and unsecured creditors. There is a common misconception that many people have perhaps due to advertising by some attorneys that their credit report is going to be wiped clean after the bankruptcy is discaharged. This is not true. Your credit report will show all those discharged debts as well as the bankruptcy for 10 years.
In this type of bankruptcy you have the option of reaffirming on any debt you that you would like to continue paying. Some examples of debts people reaffirm on are mortgages and car loans. Make sure before you reaffirm on either of these type of debts that you are not in a negative equity position ( that you owe more on the house or car than what it’s worth).
Chapter 13 – This is a debt repayment plan managed by a bankruptcy trustee appointed by the court. Your debts are repaid according to the agreement reached between you and your creditors. In order to get any credit while you are in a chapter 13 you must get a letter of exception. This letter of exception allows you to aquire more debt and it also prevents this new debt from being included in the bankruptcy.
Before you go shopping make sure you gather up the following items: 1. Your most current paystub, if you’re self employed or on a fixed income 3 months of current and complete bank statements showing this income being deposited into your account. 2. Valid drivers license. 3. Current phone or utility bill. 4. At least 7 personal references with complete names, addresses, and phone numbers. These are used by the lenders in the event you stop paying on your loan and can’t be contacted. Determine the type of vehicle you need and decide if it is a practical choice. Don’t try to get your dream vehicle. These bankruptcy auto loans are designed to get you into a vehicle you can afford and re establish your credit.
Once you have all your documents together complete the following steps:
1. Have a down payment. If you have had credit issues the lender is going to want to see some kind of commitment from you so they are not the only ones taking a risk.
2. Be realistic about how much car you are trying to purchase. For example if your gross income (before taxes) is $2000 a month your monthly car payment should not exceed 15% of that amount which in this example would be $300.00 a month.
3. Make sure that all of your monthly bills including your car payment does not exceed 40% of your total income. For example $2000 a month income before taxes = $800 a month in total bills including your car payment
You need to understand that you are going to have to pay a higher rate of interest because you represent a greater risk to the lender. A 17% interest rate or higher is not uncommon.
Now that you know what type of vehicle you want and what kind of payment you can afford you are ready to go shopping.
Once you have selected a vehicle I recommend you include the following items in your car loan:
Entended Warranty – This is critical to protect you from unexpected repair costs that may affect your ability to pay your loan.
Gap Insurance – In the event you total out your vehicle this insurance will pay the difference between what you owe on your vehicle and what the insurance company will pay including your deductible.
