How to Get a Car Loan After a Bankruptcy

If you're reading this, then there's a good chance you've recently filed for bankruptcy. Naysayer's may have tried to convince you that filing for bankruptcy means you're going to have bad credit for the next seven years. Your attorney, friends, or family may all be telling you how bad your life is going to be because of your bankruptcy.

These warnings are FALSE.

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. Get it together.

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. Save Save Save!

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.

A secured credit card is an excellent tool for re-establishing bad credit. First of all, as long as you have enough cash for a deposit, you can get a card. Secondly, they're considered credit and they'll help you build some positive credit history. But whatever you do, don't carry a balance on your new secured credit card and don't use it more than once. In fact, you want to use the card one time and then cut it up. That way, you'll still be getting credit and your credit report will show that you're a disciplined credit user.

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. You can now get the car you want.

The end is here. You've done everything right, a year has passed since your bankruptcy discharged, and your credit is now re-established. You can get the car you want.

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.

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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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