Buying a Car After Bankruptcy: Financing With A Credit Union

Published Saturday, June 13, 2009 @ 2:25 pm

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Once your bankruptcy is behind you, your credit will begin to improve faster than you may expect―as soon as a year after filing, you may be eligible to receive a loan to finance the purchase of a new car.  Armed with a few tips, you can locate a good loan.

First things first: for the period immediately after your bankruptcy, as you prepare to move on with your life and before you undertake steps like financing a car, make sure you are laying a good foundation. Everything you do as you repair your finances will go to building a good case for why you will make a good credit risk. Make sure you are making your payments, in full and on time, religiously. In addition, make sure to request a credit report and carefully review it to make sure that there are no mistakes or debts lingering from before your bankruptcy which ought to have been wiped from your report. Sometimes a request for a loan will be denied over a mistake in your record, but you will not find out the reason. Better to avoid this kind of uncertainty or surprise.

Before approaching a lender, it’s a good idea to figure out what kind of car you’re going to buy and how much it will cost. As you’re making this decision, keep in mind some important facts: a brand new car will be much more expensive than a car of the same make that’s even two or three years older. A really expensive car will mean years of payments―is that really what you want to sign up for? Make sure the car you buy will be reliable, will not entail expensive repairs and will meet your needs.

Next, you should consider whom to approach for the loan. You could approach a dealership, but there are better loans out there. One of the best places to get a loan is a credit union. Put this choice at the top of the list and seek out a credit union you are eligible to join. When your bankruptcy is at least one year old and you have a clean payment record, your credit union may offer you a great interest rate on a loan to finance your new car.

If you do decide to approach a credit union for a car loan, keep on your toes: some credit unions offer what’s called “indirect lending.” This kind of loan is actually a kind of dealer financing. The downside is that you may end up paying a commission to the dealership for originating the loan. One good giveaway that your loan is “indirect lending” is if the credit union doesn’t require you to actually go in to the credit union. If you’re not sure, you should call the credit union and ask them who pays for the “dealer fee.” If it’s you, or the credit union employee doesn’t know, go in to the credit union so you can fill out the paperwork yourself. This could actually save you hundreds of dollars. Once you’re at the credit union and talking to a loan officer, be honest about your bankruptcy and explain how you’ve worked since then to improve your credit.

If the credit union doesn’t work out for one reason or another, don’t despair. You may still be able to get a loan through another kind of bank, or perhaps from a dealership. But do make sure to try a credit union before looking at these other options.  Before long, you could be in your brand new wheels!

Serving North Carolina residents, John T. Orcutt has helped thousands of families get real relief from debt. Call today to set up your free initial consultation. 1-800-899-1414.

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