What Are The Benefits of Bankruptcy Car Loans?

Bankruptcy car loans are available to those individuals who still have a bankruptcy on their financial records and need to finance the purchase of a vehicle. Bankruptcies do expire depending on the statute of limitations set in each state. However, if the bankruptcy is within the statute of limitations, it will be hard for a borrower to get a new loan on an auto. High risk lenders extend bankruptcy car loans at high rates, but the benefits are worth the cost for many borrowers. 

Secured Loan Option

One advantage to seeking a car loan is you can usually secure the loan against the title of the car. A lender will hold on to the car title, and it will be transferred to you when you pay off the loan. This is advantageous for high risk borrowers who will be met with very high interest rates. Opting for a secured loan can take away some risk from the lender. As the borrower assumes the risk of the loan, the cost of the loan will go down. An unsecured loan on a bad credit score may not be possible for many borrowers following a bankruptcy. If it is possible, it will be an extremely expensive form of financing.

Rebuild Your Asset Base

Bankruptcy will strip a person of his or her assets as they are seized, sold, or given back to lenders. It is critical to begin rebuilding equity and an asset base following this situation. Mortgages are very costly and hard to obtain if a borrower has a foreclosure on record. Many mortgage lenders will tempt bankruptcy borrowers into sub-prime loans, which will end up being very expensive and risky for the borrower as rates adjust. A bankruptcy car loan is a more stable option to rebuild an asset base when you have bad credit. You can start to slowly regain a small amount of equity. 

Improve Your Credit

As you rebuild your assets and make loan payments, you will slowly start to rebuild your credit. Secured bankruptcy car loans are very risky for the borrower. This risk will pay off, though, much faster than a safer form of financing. While a person with good credit will only see a credit score improve moderately by making car payments, a person with bad credit will see large and fast changes. For this reason, a car loan can be the first step for many people to regain a credit score and get back into a home following bankruptcy. Paying off the car loan in 3 to 5 years will significantly boost your financial profile. 

 


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