How to Get a Car Loan After a Bankruptcy

When you file for bankruptcy, a lot of people will tell you that re-establishing credit will take years. They'll also warn you that you'll be unable to buy anything on credit for a long time, and that your credit history will be permanently damaged.

This is NOT true.

While filing for bankruptcy definitely hurts your credit, you can overcome most of the harmful effects in as little as one year. If you know how to work the credit system, you can have good credit again soon.

1. Make a plan.

You want to create a budget and make a savings plan. It's very important you come up with a savings plan that you're going to follow. You also need to make sure that any creditors who send you collection notices are taken care of right away. You can't ignore these notices just because they're for debt that was included in your bankruptcy. Contact the creditor and make sure they know so they don't file a new collection and stop the re-establishment process. Last, make sure you know why you filed for bankruptcy and how you're going to make sure it doesn't happen again.

2. Start hoarding.

While saving a couple of months salary is probably the hardest part of the process, you need to have an emergency cash fund. Besides, you'll need cash for a down payment and secured credit cards. You also need to save all of your important financial documents like pay stubs, bank statements, and bankruptcy documents. Keep them in a safe place because you’ll need them to show creditors in the future.

3. Get a secured credit card.

Once you're able to save up a little bit of cash it's time to get a secured credit card. Secured credit cards are credit cards secured by a cash deposit, with the amount of your deposit being the amount of available credit. The key to these cards is to use them only once and then destroy them. When your first bill comes, pay the card in full. By doing this you'll trick the credit reporting agencies into giving you credit for making payments in full every month, even though you've only used the card once. By destroying the card, you make sure your balance stays at zero.

4. Purchase a cheap used car.

Believe it or not, buying a car after a recent bankruptcy can be done. But you need to know a couple of things first: this car isn’t going to be the car of your dreams. The car of your dreams is probably too expensive. If the first car you buy after bankruptcy is something cheap with good resale value (like a small car or small SUV) you can trade it in a year and get a car you'll like. Also, you've got to have a down payment saved up.

5. Get more credit.

Now that you’ve bought a car and you have a secured credit card, it’s time to get some unsecured credit cards and to start working with a local credit union. Apply for the Discover card, any Visa or MasterCard (as long as there isn't an annual fee), or any credit card offered by your credit union. Most importantly, if your application for a credit card is denied, call and ask WHY. Because most applications are denied by computer, you can often call and get a denial overturned.

6. Get the car you like.

The goal — you can now get the car you want after your bankruptcy. If you’ve followed all of the previous steps, you will have a good credit history AND a good credit score. Buying the car, truck, or SUV you want is now firmly in your grasp.

With all of these steps, it’s important to remember a couple of things. First, save money every month. Saving money is a life skill that everyone should have. Second, remember what caused your bankruptcy and don’t let it happen again. Use a budget, avoid impulse purchases, and make sure that you can pay all of your bills even if a major catastrophe occurs.

Article Source: http://www.a1-optimization.com/articles

Author Jason Lancaster has many years of knowledge & experience in the auto industry. He's helped hundreds get a car loan after bankruptcy and knows how the credit system works for bankruptcy car loans.
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