Although the amount of people filing for bankruptcy has decreased over the past 10 years, the number of Ohio residents who filed in 2016 was over 8,000. While this black mark will make a big impact on your credit history, it doesn’t mean that you’re out of luck when it comes to buying a car.
By being an informed car buyer, you can still find an affordable vehicle to meet your needs while also starting to rebuild your credit.
Review Your Credit Reports and Know your Credit Score
After filing for bankruptcy, the last thing you probably want to do is check your credit report. In fact, you may even dread it. But it’s important to know what your credit report says so you know what your financing options are for purchasing a vehicle since you probably won’t qualify for financing from a traditional lender.
It’s important to pay attention to what the report says about previous auto loans since those are often more heavily weighted in the credit scoring models used by auto lenders. A history of positive, on-time car loan payments reported during and after bankruptcy can be helpful in securing an auto loan.
Get a Down Payment Together
The key to getting a car loan after filing for bankruptcy is by putting down as much money as you possibly can. The larger your down payment, the less risk your lender is taking since they also have your vehicle as collateral. Need some ideas for making money for your down payment quickly? Here are some suggestions:
- Sell something you don’t need anymore – We all have things like electronics, clothing or furniture that we don’t use. Instead of these things taking up space and collecting dust in your home, you could sell them on places like Craigslist® or Nextdoor®. If you have a lot of items you’d like to get rid of, consider having a garage sale to earn some extra cash.
- Look for side jobs to raise extra money fast – Could you spare a few hours a week and become a part-time dog walker for your neighbors or maybe pick up a seasonal job at a local store during the holidays? Taking on additional, temporary employment is a fast way to build up your savings.
- Ask a trusted family member or friend for a loan – Most people hate asking for money, but if you have a family member who has some cash to spare and would like to help, it doesn’t hurt to ask them for a loan. Borrowing money from family members who won’t charge you interest and tack on additional fees is another good way of getting a sizable down payment in a hurry. Make sure to be clear on your repayment plan though, so there are no hard feelings down the road.
- Return items you’re not using – Have you ever bought a DVD or pair of shoes, and once you got home they never left the bag? It’s easy to make impulse purchases and then decide a few days later that it’s not something you wanted in the first place. If you have some unused items that still have the tags on them and you’ve held onto the receipts, it doesn’t hurt returning them back to the store and letting them know that you simply changed your mind.
- Trade and/or borrow – There’s nothing more frustrating about saving up for something only to then be hit with an unplanned expense, such as a costly home repair or a new piece of sports equipment for your child’s after-school activities. If you know someone who is good at fixing a leaky faucet or have a friend that has a barely used hockey stick that her child isn’t using anymore, you shouldn’t be afraid to ask for help. You can always return the favor by running errands or offering to babysit your friend’s child later.
Set Realistic Expectations
It’s time to get real about how you ended up in bankruptcy in the first place. Were you overextending yourself with unnecessary luxuries such as buying gourmet coffee every morning, eating out frequently or hitting the mall for the newest designer brands?
While you may have visions of yourself cruising around in a luxury car, it’s important to be practical about what kind of vehicle you really need. If your vehicle is going to be used primarily for getting you back and forth to work every day and you don’t have a large family, then an economy sized vehicle that gets good gas mileage would make more sense than a large SUV.
By making a budget-friendly car purchase now, you’re less likely to put yourself in the same situation of having too much money going out and not enough coming in, which is one of the surest
ways to put you in the same bad credit situation again.
Selecting the Right Buy Here Pay Here
After the emotional toll filing for bankruptcy can take, you may feel that accepting any offer when purchasing a vehicle is your only option. Dealers know that potential customers who’ve recently filed bankruptcy are more vulnerable to take whatever offer they’re given. But by shopping around and taking the time to negotiate a price instead of taking a loan out of desperation, consumers can save themselves hundreds or thousands of dollars down the road.
At J.D. Byrider we are upfront with our pricing and try to work with our customers on buying a car that will meet their needs and still fit comfortably within their budget. All our vehicles also undergo a thorough 92-point inspection before sale, so you don’t have to worry about unexpected mechanical problems down the road. Stop by any of our three Columbus locations to see our current inventory.
Epiq Systems. (2016, December). Retrieved from American Bankruptcy Institute: http://www.abi.org/newsroom/bankruptcy-statistics
Facts are Facts. (2015, May 6). Retrieved from Center for Responsible Lending: http://www.responsiblelending.org/research-publication/facts-are-facts-auto-dealer-interest-rate-markups-costcustomers
How to Buy a Car After Bankruptcy. (2013, August 20). Retrieved from Edmunds: https://www.edmunds.com/car-loan/how-to-buy-a-car-after-bankruptcy.html