As you emerge from the bankruptcy process, you may wonder how your current financial status can affect your ability to make major purchases. While buying expensive things might be the last thing on your mind, something like a vehicle may be necessary.
For most Floridians, a car is a basic need, especially if you live somewhere with limited access to public transportation. But what if you don’t have a car or lose it in bankruptcy?
Buying a car post-bankruptcy is possible, but it comes with certain challenges. Here’s what you need to know.
Expect high interest rates
Both Chapter 7 and Chapter 13 bankruptcies can have long-term negative impacts on your credit report, about seven to 10 years, in fact. However, you do not have to wait that long to consider financing.
Chapter 7 bankruptcy is usually completed in four to six months. After that, it is possible to get an auto loan. On the other hand, Chapter 13 takes around three to five years because it allows debtors to catch up on their loans. You may need to get permission from the bankruptcy court to get a loan.
Either way, you will likely only qualify for very high interest rates. This is because creditors see you as a risky borrower.
That said, it may be better to wait until your credit score recovers so you can get lower interest rates. An alternative is to make a larger down payment to lower your monthly payments but only do so if you can truly afford it.
Buying a cheaper car may be a better option
A brand new car, even a relatively inexpensive model, is still going to be costlier than a used one. Consider purchasing an older yet well-maintained car so you have a means of transportation until you can buy a better one.
This option can also give you the opportunity to rebuild your credit score. If you buy a used car on a loan, the payments are often more affordable. Paying them off on time every month can have a positive impact on your credit.
Smarter choices now can create a better financial future
Bankruptcy can have a huge impact on your life, but it is not the end of everything. By making informed choices, you can start rebuilding your credit and making better financial habits for the future.
