Will Filing Bankruptcy Affect Your Ability to Get Bad Credit Auto Financing?
Will filing bankruptcy affect your ability to get bad credit auto financing? This is a common question among people who are heavily in debt and seeking financial advice. The answer really depends on your personal preferences as much as your financial situation. There ARE bankruptcy alternatives, but those alternatives may not be right for everyone. In order to decide whether or not you should file bankruptcy, and whether it will affect your ability to get things you need such as car loans, you should first know the main reasons WHY people file, and then learn about what alternative options are available that might apply to your own unique situation. This could help you ensure you can get a car when you need one.
The main reasons that people file for bankruptcy are:
* They have more debt than they are able to pay back in a reasonable amount of time.
* They have more debt than they can pay back at all. In these cases, their minimum monthly payments on all their debts is more than their budget can handle without sacrificing necessities, such as rent and food.
* They want to avoid the embarrassment of having their wages garnished to pay back debt, since this would mean their employer would know about their financial difficulties.
* They want a fresh start with their credit. While your credit will be damaged for up to 10 years following bankruptcy, you’ll likely be able to start getting low-limit credit cards and small loans again within a year or two, which will allow you to get a new financial start and begin rebuilding good credit. This is attractive to many people who are considering filing bankruptcy.
* They realized that filing for bankruptcy will be cheaper for them than paying back their debts, which affects their ability to get bad credit auto financing.
The alternatives to bankruptcy are:
* Debt counseling services: These services help you consolidate your monthly payments and obtaining lowered interest rates on unsecured debts. Counseling can have a negative impact on your credit, however, and will lengthen the amount of time it takes to pay back your debt.
* Debt consolidation loans: You can often get a low-interest loan that allows you to consolidate your debt into one monthly payment. This is convenient and allows you to pay back your debt quicker, and for less interest. However, be careful if you’re using your home equity to get this loan, as you could end up losing your house if you default on the payments.
* Debt settlement: You can often get creditors to agree to cancel your debt for less than the amount you owe. This is especially likely if you’ve had the debt for a long time. You’ll be able to settle for cents on the dollar of what you originally owed, but this will usually go on your credit report as having settled for less than the amount due, which can have a negative effect on your credit rating. This may impact your ability to get good rates on automotive financing, but you should still be able to find a car loan, even at higher interest rates.
So, if you’re wondering if filing bankruptcy will prevent you from getting bad credit auto financing, you should take all of the above information into account. If you’re able to pay back your debt in a reasonable amount of time, it may be worth your while to contact your creditors and try to work out a more equitable payment arrangement that will allow you to repay them without breaking your budget. Your credit will rebound much more quickly this way than if you declare bankruptcy. Once your creditors are paid, you can sometimes even get them to take the debt off of your credit report entirely, which will boost your score even more. A good credit score is important, as it allows you to get the best interest rates on mortgages and car loans, and can help you qualify for good jobs in the future (yes, employers often check credit reports before hiring). If you think you’ll be needing a new or used car in the near future, it’s better to look at bankruptcy alternatives first, as you’ll need to be out of bankruptcy and have a couple of years between filing for it and applying for a car loan before you’ll likely be able to get one.
