Bankruptcy can devastate your finances and can make obtaining a reasonable interest rate on a loan difficult. Chances are you'll end up with a high interest rate loan if you're able to purchase a new or used car after bankruptcy. You may want to look into auto refinancing after bankruptcy as a way to save money and lower your initial high interest rate auto loan. Keep the following tips in mind in order to have the best chance of getting approved to refinance your auto loan.
Make Every Payment on Time
Refinancing an auto loan after bankruptcy may be difficult, but it can be done. One key to refinancing your auto loan is proving you have improved your financial situation. Show lenders that you're worth taking a risk by making all of your payments on time, not just your car loan payments. The more payments you make on time, the more impressed lenders will be. Aim for a minimum of at least six to 12 months of on time payments before applying to refinance your auto loan. Of course, a longer streak of on time payments is always better.
Know Your Credit Score
Your credit score is another key to refinancing an auto loan after bankruptcy. Interest rates on auto refinance loans are usually based on credit scores, so you'll likely be able to obtain a loan with a lower interest rate as your credit score increases. Monitor your credit score by using My LendingTree where you'll get a 100% free credit score with free updates every month. Once your score increases to the level that corresponds with the interest rate you desire, you're ready to consider applying to refinance your auto loan.
Strategically Time Your Auto Refinance Application
You shouldn't just blindly apply for auto refinancing after bankruptcy if you want a good chance of being approved. Instead, strategically time your auto refinance applications so you have the best chance of lowering your interest rate. The timing will vary from person to person based on the particular bankruptcy situation. After you've accomplished the above goals of making a number of consecutive on time payments and raising your credit score to your desired range, apply to see if you qualify for auto refinancing at a lower interest rate.
Shop for the Best Loan
Make sure you shop around for the best loan when refinancing after bankruptcy. While one bank may deny you, another may offer you a great deal. Different banks have different criteria for how they approve loans. When comparing loans, pay attention to fees, interest rates, the length of the loan and total loan costs while determining which loan is best for your situation.
To save time and frustration of applying at multiple banks, you can get multiple auto refinancing quotes with just one application using LendingTree. If you aren't approved to refinance your auto loan, don't give up. Continue making on time payments and continue raising your credit score. Then, apply again in a few months and you may be approved.