- Most auto lenders won’t consider bankruptcies more than five years ago. Only exceptions are when:
You have not done anything to “reestablish,” which means that you haven’t received another installment loan since your bankruptcy filing. An auto lender won’t likely care about your 7-year-old bankruptcy if you haven’t bought a house or car since bankruptcy filings.
A previous bankruptcy may make it harder to obtain a loan if you are currently “financially exhausted”, meaning all of your credit cards are over the limit, and/or your total debt/income ratio is high.
They may review your application carefully if you have filed for bankruptcy multiple times in the past 10 years.
- Keep in mind that the local dealership may try to convince
Yyou that you have bad credit and that you must pay a higher rate of interest. Because they can make more interest by getting you to sign up, they might do this. I advise you to apply for a loan or at least a tentative approval before you visit the dealership.
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Before you shop for a car, I recommend that you get an approval from RoadLoans.com.
- The following are the main reasons why most auto loans are declined or approved:
- Credit score of the applicant
- The amount of the payment in relation to your income. Also known as your “payment-to-income” ratio.
- The total amount of debt that you have
- The “loan-to-value” ratio, also known as LTV, is the ratio of your loan amount to the car’s value.
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Your credit score (730) should be considered “A”, and you should be able to get approved if you don’t have too many bills or buy more cars than you can afford. It all depends on the car you are buying. The loan to value metric may not be acceptable.
Lenders want every borrower to have a loan ratio of less than 90% in their ideal world. You would need enough equity to pay all taxes and fees, plus 10% of the vehicle’s price. This could be done either through cash down or by trading.
Most lenders understand that many people are reluctant to pay down money. You can often get terms that go up to 105% of the vehicle’s value. You can buy a car without spending a lot if you negotiate a fair price.
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That being said, I recommend that you make a down payment along with a short-term financing agreement. Cars can be expensive. The less you pay for financing the better.