Buying a Car after Bankruptcy: Misconceptions vs. Reality

Many people go through financial setback during the course of their life. While some may suffer from a bad credit score, others become a victim to bankruptcy. Usually, a person faces either chapter a 7 bankruptcy or a chapter 13 bankruptcy. A chapter 13 bankruptcy is for debtors who can repay a certain portion of their debt with the help of a repayment plan. On the other hand, a Chapter 7 bankruptcy is useful for debtors who possess little or no disposable income and wish to get rid of their excess unsecured debts.

Many people who file for bankruptcy think it is impossible to obtain additional financial assistance. Misconceptions cloud their thinking and it sways them from the real scenario. However, with the help of certain guidelines and the right mindset, you can obtain an auto loan for buying a car

Buying a Car and Bankruptcy: Common Misconceptions to avoid

1) Misconception: I will not be eligible for an auto loan after bankruptcy.

Reality: Bankruptcy may be a temporary halt but it is not the end of your financial journey. The common misconception is that a person suffering from bankruptcy will not get approval for any loan. However, the reality is different. A bad credit auto loan is the best option available to individuals with bankruptcy. The probability of obtaining approval for a bad credit auto loan increases as the loan is designed for individuals with credit issues. Thus, put your efforts in researching for lenders who provide bad credit auto loans and getting your dream car will not seem like a distant dream.

2) Misconception: Bankruptcy ruined my credit score. Improving it is a challenge.

Reality: A credit score is made up of numerous factors such as the types of credit, amount of your debt, credit history and payment history. The situation of bankruptcy helps you to eliminate most of the elements that create a negative impact on your credit report. Additionally, the debt-to-income ratio of people after bankruptcy is better than the one prior to bankruptcy. Therefore, obtaining an auto loan is a chance to improve your credit score provided you make the payments on time.

3) Misconception: My purchase options are limited to used cars.

Reality: While it is advisable to be calculative in making future financial decisions, the options of purchasing the types of cars are not limited. A person who recently suffered bankruptcy is open to purchasing new cars as well as old cars. The best alternative to a used car is a discontinued car model. Purchasing a discontinued car model helps you to obtain a new car for a budget-friendly amount. Also, the car dealers are eager to sell the discontinued car model to free their shelf space. Therefore, a discontinued car model will help you stay in your budget and allow you to get your hands on a new car.

Today, bankruptcy does not carry the negative stigma that it carried two or three years ago. Many lenders are aware that bankruptcy occurs due to business failure, decrease in income, loss of a spouse or any other unexpected crisis. Yet, misconceptions occupy the minds of people and force them to avoid applying for an auto loan. However, with a little market knowledge, enough courage and the right mindset, you can get one step closer to the car of your dreams.