Disadvantages of Getting an Auto Loan After Bankruptcy
Bankruptcy may erase poor financial choices, but it still mars the paper on which they were written. A credit report will reflect the damage done by a bankruptcy for years to come. Unfortunately, consumers who are already strapped for cash usually cannot wait years to open an auto loan after bankruptcy. In a country where public transportation is a lengthy ride in major cities and nearly nonexistent in less populated areas, a working vehicle is essential to getting to – and keeping – a job. When an old jalopy breaks down and the repairs exceed meager savings, consumers may find that they have no choice except to take out an auto loan. Shoppers with a bankruptcy in their past are towing more dead weight than just a broken and useless vehicle.
Bankruptcy can lower credit scores by as much as 220 points. Being a high-risk loan applicant can, at worst, prevent a consumer from accessing a much-needed loan, or, at best, make a consumer vulnerable to high interest rates and bad terms.
Even high-interest loans can be labeled good or bad based on their terms. From down-payment requirements to early pay-off fees, loans with identical interest rates may, indeed, be very different. One of the most critical factors for high-risk borrowers is the early pay-off fee. Even a gut-wrenching payment is digestible if the borrower can plan on refinancing within two years. If the car loan charges a fee for an early pay off, then refinancing with a lower fee in mind loses it luster.
For these reasons, consumers with a history of bankruptcy should take the time to shop around for their car loan. One-stop shopping at the dealership may be convenient, but will cost in the long run. A much better choice is to spend at least a couple of days shopping for an online auto loan.
Vehicle loans for borrowers with bad credit, even with a bankruptcy history, are more plentiful online. The lenders who operate on the Internet have access to dozens of banks that are willing to offer attractive terms to high-risk borrowers. Transportation is an important component to financial well-being. Consumers who own a car are more likely to keep their jobs and are able to work farther from home. Bankruptcy certainly affects the type of loan a high-risk borrower can qualify for, but it does not have to mean financial ruin due to rejected loans or confining terms.