How to Get a Car Loan After a Repossession
Your credit will take a hit after a repossession which will make it a challenge to get another bank to offer you financing in the future. Getting a car loan after a repossession though is a second chance to improve your credit and take back control of your finances. Here are some steps you should take to help improve your chances of being offered a second chance.
1. Really understand your credit situation.
Poor credit means higher interest rates compared to someone with good credit which is why understanding your credit will give you a better idea of what you should expect if approved. You should check your credit reports for any errors so that they can be disputed if needed. You are eligible for a one free credit report once a year. I like to use Credit Karma which allows you to view your TransUnion and Equifax credit reports. Credit Karma updates every week and alerts you to any new information received as well as shows you a score for free. The score showed may be slightly higher or lower though then what a lender will see due to the differences in industries (ie: credit cards, auto loans, mortgages, etc) but you are able to see each account and its current status.
2. Try rebuilding your credit before you apply.
After a repossession or other event which negatively impacts your credit history, rebuilding your credit shows the lenders that you are less of a risk and have managed to budget your finances. How can you rebuild your credit?
Pay your loans on time every month
Stay well within your credit limit. Keep your balances at 30% or less of your total available credit line. A balance that's close to being at the max limit is looked at negatively by scoring models.
Only apply for credit you need. Applying for a lot of credit in a short period of time may lead lenders to believe that your finances are taking a turn for the worse.
A long credit history will help. The more you can build up a track record of good payment habits, the more information there is to prove that you are a good credit risk. Do not close out accounts not being used.
3. Apply with a co-borrower or cosigner.
Applying with a credit worthy co-borrower or cosigner means you are applying for a joint auto loan. If you are approved, this means that both parties are considered responsible to make sure that payments are made on time each month and payment history will reflect on both parties credit reports.
4. Plan for a good down payment.
Putting money down is very helpful when you need a new car loan after a repossession. The more you have to put down, the more favorable your application will look to the bank. 20% - 30% of the vehicle sales prices is considered a good down payment.
5. Be realistic and know what you can afford.
Repossessions can be the result of someone purchasing a vehicle that was simply too expensive for their budget. Look at your budget to determine how much you can afford in terms of monthly payment and total loan amount.
6. Choose the right lender.
Not all lenders are created equal. Some banks will not accept applications from consumers with poor credit so find a lender that does. AppCore is a full spectrum company with many years of experience helping customers get the financing they need following repossessions.
Enjoy more control with a pre approved auto loan.
At AppCore, we not only make the financing process fast and easy, our customers enjoy the advantage of pre approval too. It takes just a few moments to complete our secure application, in your own time. Our experienced representatives will review your application and credit history and provide you with an amount you can spend, giving you the confidence of a cash buyer.