05-13-2017 06:45 PM
I just had my 341 meeting last week. My car is not doing very well, I will need to get one soon. I will have about $6k or $7k. Should I use that as a downpayment on a car loan for a used car after my discharge, or just buy one with cash? I obviously need to work on my credit, but I don't know if I should work on it different ways after my Bk is discharged. My credit score is about 570. It has gone up about 30 points since I filed Bk.
05-13-2017 07:58 PM
Well if you havn't already, the mailers should be rolling in soon from all kinds of car dealers wanting your business. They watch the courts for bk fillings and they get the info and send you offers for financing. I am sure the rates are horrible, i do not know but i can only imagine. Like everyone says read over everything before signing anything. Also check with your current bank or credit union about possible financing, as well as most dealerships have special financing, ie sub prime financing, but be prepared to pay 18%+ on an interest rate along with a considerable down payment. Dont throw the whole kitty at them upfront, only bring what you are comfortable putting down that way you have wiggle room. Also do some research online about dependable cars and such so you get the most bang for your buck.
05-16-2017 11:10 PM
Welcome to Myfico, you will find this site to be a tremendous resource in your rebuilding efforts. Knowing that post discharge you will be reestablishing your credit and it will improve fairly rapidly, in fact those who file BK tend to be able to rebuild faster than those who don't. With that knowledge I would visit the rebuilding section and develop the best strategy for credit cards etc that will help to establish positive trade lines, also some do share secured loans with Alliant and repay it right away to get a postive installment loan history. Point is the better your scores the cheaper the car is going to be (lower interest) we are talking thousands over the life of the loan so in my opinion I would wait as long as I could to get reestablished because the difference between 18% and say 10% is huge. If you have to take a high interest loan you certainly want to be careful to ensure that you put yourself in a position where it will be possible to refinance it as your credit improves. I didn't file BK but did a rebuild and for example I went from 12.57% to 4.29% in 7 months of rebuilding saving me over 7k in interest over the life of the loan. To do that you need to improve your scores and have the loan to value ratio that is acceptable so having a down payment upfront is the best way to absorb the depreciation hit and transaction costs that come with any car purchase. The good news is that it is well documented in the industry journals that the market is being flooded with lease return cars which is bringing down used car prices so one good way to protect yourself from depreciation after the purchase would be to pick up one of these lease return cars. Dealers are pretty predatory when your credit is beat up and they know you really need to the car so be aware that they will get you qualified but will likely try or be successful in marking up your interest and will likely try to add warranties and other high profit items to the deal which will hurt you in the long run.
05-17-2017 08:53 AM
There will definately be lender's willing to finance a vehicle for you directly after BK discharge or even during a BK. However, as other's have pointed out the interest rates could be north of 18% (depending on how your credit profile looked before the BK), these lender's specialize in BK financing because in a way it's a safer loan for them in the aspect that you can't file for BK again during the course of the loan. Some of these lender's include, CPS (consumer portfolio services), Prestige Financial, and Santander will finance after discharge or during a CH 13 with a trustee letter.
If I were in your position I would try to obtain a few credit card's and possibly a personal installment loan to build positive payment history after the bankruptcy and make do with your current vehicle for as long as possible. Having a little time under your belt with positive payment history after a BK will not only boost your score's but open up your credit profile to more prime lender's such as credit union's, Ally, Wells-Fargo, etc that will get you better interest rates.
I would try to make due with what you have for as long as possible isntead of punishing yourself with a high interest rate car loan that will build negative equity very quickly making it difficult to refi at a later time, many people get stuck in these loan's because of negative equity with little to no option's other than refinancing with a large sum of cash down, or purchasing a brand new vehicle with rebates to eat up the inequity ( which isn't a great solution to the problem in my opinion)
05-18-2017 06:14 AM
Thanks for the advice. Pickle76, yes they have been rolling in. I have been gathering a lot of information about credit rebuilding, and making a plan for after my discharge, but my car is really doing bad. I don't even know if it will last until my discharge, so I don't have a choice about getting another car. I can put about $5k or $6k down, which should make it a bit easier to get approved. I am hoping to refi after a year or so, after my credit has improved.
05-18-2017 11:35 AM
Some people choose to wait a few months and buy a cash car and follow the "700 in 24 month" plan that is posted on here, which would significantly help your credit out in just 6 months to a year. At that point then would they get an auto loan.
My circumstances were different being that I'm in sales so I needed a relaible lower mileage car as I drive 25K + miles a year. As Semo mentioned, Santander, CPS (Consumer Portfolio Servies), and Road loans will finance right before or right after DC. I was financed by CPS with a 17.5% interest rate with two auto loans IIB but otherwise several perfectly paid auto loans prior to BK. Santander didnt approve me but Road Loans approved me up to $30k with a interest that varied depending on the vehilce if it were new or not. Road Loans tells you which dealer to go to within their network and none of those dealers had a car I wanted. The dealer I went to had a relationship already established with CPS.
The trick to waiting is that a lot of the captive lenders want to see some type of auto history after a BK regardless how well you've built your credit after a DC. Some mainstream brands like Toyota/Ford might be more leninent but It doesnt hurt to get a head start and finance a high interest loan for a year then refinance for a lower interest rate. This will only just help your credit in the end.
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