Why Some Car Dealerships Avoid Bankruptcy Customers

dealers avoid bankruptcy customers

Filing for bankruptcy is a big step, but one that will ultimately help you get your debt under control so you can make a fresh start and move forward. But what happens if you file bankruptcy and then realize you have to replace your car? You might go to one of your local car dealerships, only to find out they can’t or won’t help you get the car you need as some dealers do not work with bankruptcy filers. Why do some dealerships avoid bankruptcy customers? This article will explain why, as well as what you can do to still get the car you need even when you’re in the midst of a bankruptcy.

Reason #1: Few Lenders Willing to Finance Bankruptcy Customers

not many bankruptcy lenders

The first thing to understand is that there really aren’t that many lenders who are willing to make car loans (or any kind of loan, for that matter) to people with an open or recently discharged bankruptcy. Why is this the case?

Many lenders like to restrict their loans to people who have a great credit score and solid credit history of making payments on time. They make money on these loans by charging interest and fees for making money available to you to buy a car. In other words, they want to get their money back, and then some. People with great credit are the ones who are most likely to repay their loans. The better their credit, the less likely they will default on the loan. They represent the lowest possible risk of the lender losing any money.

Another way of putting this is that some lenders are “risk-averse,” meaning they don’t want to take a risk by working with bankruptcy customers. The lenders see bankruptcy customers as a higher-risk group of people who are more likely to encounter difficulty in repaying their loan. They simply don’t want to take the risk. When they look at a bankruptcy customer, they see someone who has failed. They see a glass that’s half-empty, to borrow a well-used metaphor.

This is a shame, really, because the whole point of filing bankruptcy is to give you a way to get your financial life back in order. The good news is that there are lenders out there who look at a bankruptcy customer and see a glass that’s half-full. They understand that filing bankruptcy is a positive step to reduce or eliminate your worst debts so you can get back on your feet. These are the lenders who have fresh start car loan programs and are willing to work with bankruptcy customers. Yes, it will cost you more in terms of higher interest rates to get a bankruptcy car loan, but that is understandable since the bankruptcy lender is taking on a higher level of risk by lending to you.

Although it would be nice if there were more lenders willing to work with bankruptcy filers, the reality is that it remains a limited pool of companies. Some dealerships avoid bankruptcy customers because there simply aren’t that many lenders they can work with, and it takes time and effort to develop relationships with those lenders. For many dealerships, it just doesn’t feel like it’s worth the time and effort to try and make this happen.

Reason #2: A Small Market Means Some Dealerships Avoid Bankruptcy Customers

small market for bankruptcy car dealers

An additional reality to layer on top of the lack of lenders who are willing to work with bankruptcy customers is how in most places, bankruptcy filers who need to finance a car purchase represent a small, niche market. In smaller communities, there really aren’t very many people filing for bankruptcy, and not all of them need to finance a car purchase. When you get down to this level of segmenting an audience for marketing purposes in smaller cities and towns, there simply aren’t enough people to justify the time and effort a dealership would have to make in order to set up the relationships with lenders (that are already scarce) and to conduct marketing activities to try and reach those few people. This is unfortunate if you’re a person declaring bankruptcy in a smaller place and need to replace your car because your community’s dealerships may avoid bankruptcy customers.

But this often situation changes when it comes to larger cities and major metropolitan areas. The market of people filing bankruptcy who need to finance a car purchase becomes big enough that some dealerships see an opportunity to serve a group of people who otherwise will be left out of the process altogether.

Reason #3: Lack of Experience is Another Reason Dealerships Avoid Bankruptcy Customers

lack of bankruptcy financing experience

Even when you’re in a major metropolitan area, though, you still have the situation where some dealerships avoid bankruptcy customers for the simple reason that they lack the experience needed to do it. If a dealership’s experience is mostly working with customers who already have great credit, the idea of learning how to work with bankruptcy customers is a big step. They need to understand the ins and outs of bankruptcy laws and how the process works in order to serve bankruptcy customers.

This is important because people filing bankruptcy or who are considering bankruptcy often don’t know much about the process or what their options are. When they also realize they need a car, they will have lots of questions not just about how they can get a car, but about bankruptcy in general. In other words, there is a certain level of expertise needed in order to serve the needs of bankruptcy filers. Many dealerships simply don’t have the expertise or experience.

At Day One Credit, we’ve been working exclusively with bankruptcy customers for years. We’re familiar with many different common questions and concerns people have when declaring bankruptcy and how to finance a car purchase in spite of a bankruptcy.

Reason #4: It’s Difficult and Costly to Market to Bankruptcy Customers

marketing to bankruptcy car shoppers

One final reason why some dealerships avoid bankruptcy customers is that marketing to them as a group is both difficult and costly. A lot of people in the midst of bankruptcy just assume there’s no way they could finance a car purchase, so they try to keep their current car going if they can, or rely on the help of family and friends for rides, or try to get by on public transportation even when it’s impractical and inconvenient. How can a dealership that is willing to work with bankruptcy customers reach them to let them know there are options available to them such as a bankruptcy car loan?

Because filing bankruptcy is a federal court proceeding, there is a public record in the public domain about your filing. Anyone can access these public records through a system called PACER, though very few do it. But a company that does provide services to bankruptcy filers can pay a fee (typically 8 cents/record) to access these records, including the mailing address of anyone who has filed for bankruptcy. One way to reach these potential bankruptcy car loan customers is through direct mailers. That is why most bankruptcy filers receive so much mail after filing for bankruptcy.  These mailers are quite costly for advertisers. Besides paying for each record from PACER, there are then all the costs to design the direct mailer, have it printed, and then mailed out to bankruptcy filers. The expense of this kind of marketing campaign is substantial, and the results are often not very good, often being 1% or less for many campaigns. The difficulty and expense of marketing to this group of consumers is another reason why so many dealerships avoid bankruptcy customers.

At Day One Credit, we are devoted to serving customers who need to finance a car purchase even though they have an open Chapter 7, an open Chapter 13, or a recently discharged bankruptcy. Discover more about how it works, read customer reviews, reach out through our contact us page if you have questions, or feel free to apply now!

Filing for bankruptcy is a big step, but one that will ultimately help you get your debt under control so you can make a fresh start and move forward. But what happens if you file bankruptcy and then realize you have to replace your car? You might go to one of your local car dealerships, … Continue reading “Why Some Car Dealerships Avoid Bankruptcy Customers”

How to Get a Chapter 7 Bankruptcy Car Loan

If you’re in the process of deciding you need to file a Chapter 7 bankruptcy in order to get relief from large amounts of debt, what should you do if you also realize you need to get a different car? Maybe your current situation has made you realize the car you’re driving now is more expensive than you can afford. Or maybe your current vehicle needs too many expensive repairs or just died altogether. Whatever the reason may be, the combination of needing a car and needing to file bankruptcy can feel overwhelming. But don’t worry, you may be able to get a Chapter 7 bankruptcy car loan to get the vehicle you need even while getting a fresh start through bankruptcy. Here’s how to do it in just 7 steps:

Step 1: File for Bankruptcy BEFORE Applying for a Bankruptcy Car Loan

file for chapter 7 bankruptcy

One of the biggest myths out there is that filing for bankruptcy does so much damage to your credit score that if you need to finance a car purchase, you should hurry up and apply for that before you file for bankruptcy. Not necessarily!

If your financial situation and debt load has gotten to the point where you need file for bankruptcy, your credit score is probably already very low. In fact, it may be so low that you you’ll be rejected by many lenders. But there are lenders out there who specialize in helping people finance a vehicle purchase once you have filed for bankruptcy, but not before. Before you file bankruptcy, you’re just another person with bad credit. But after you file bankruptcy, then you become a consumer who is taking action to improve your debt situation. With a Chapter 7, a big chunk of your debts are going to just be wiped away entirely. Bankruptcy lenders are the ones willing to recognize that your situation is getting better, and are willing to help you finance the vehicle purchase you need to make.

When you’re on the verge of filing bankruptcy and need a car, getting a bankruptcy car loan may be your best option, but you do have to file for bankruptcy first in order to be eligible for one!

Step 2: Assess Your Car Needs Prior to Seeking an Open Chapter 7 Auto Loan

your car needs

Before you apply for a Chapter 7 bankruptcy car loan, it’s important to spend some time thinking through your current car situation and what your vehicle needs are, as well as whether or not you meet the eligibility requirements for whatever bankruptcy lender you end up working with. If you choose Day One Credit, below are the eligibility requirements to keep in mind. Most bankruptcy lending services will have similar eligibility requirements, though these will vary by location and company.

Minimum monthly income: You need to show you’ve got at least a gross income of $2,200 in order to apply for a bankruptcy car loan. If your income is unstable or you know it’s going to be dropping (or your expenses are going to going up, or both), then you probably shouldn’t apply.

Valid license: Your driver’s license must be current and not under any kind of suspension.

You don’t already have the right car: This should be obvious, but if the car you’re currently driving is newer, has low miles, is in great shape, meets your needs, and you can afford to keep making on-time payments on your current loan, you should stick with it! At Day One Credit, our goal is to help get you into a high-quality used car you can afford that will meet your needs.

If your car is already dead, then you clearly need to get something to replace it. You might also notice that your current car is old enough that it seems to need constant repairs, which are starting to cost you more than you can afford. This is another case when it might make sense to go for the bankruptcy car loan. Maybe your family is growing and you need a bigger car. Or maybe you just got a new job that’s further away and you want to get a car with better fuel efficiency than the one you’re driving now. These are all legitimate reasons to try for a bankruptcy auto loan.

Step 3: Consult Your Bankruptcy Attorney

bankruptcy attorney

Most people need the help of a qualified bankruptcy attorney to do the filing. You should feel free to reach out to your bankruptcy attorney and get their advice if you have to replace your current vehicle. Your attorney may know of a reputable lender you can work with in your area.

If you’re looking for a bankruptcy attorney because you haven’t filed yet, visit the Day One Attorneys page for our recommendations on who you can work with.

Step 4: Find a Dealership/Lender that Works with Bankruptcy Customers

dealers who work with bankruptcies

Not all dealerships who help with financing are willing to work with bankruptcy customers. Most dealerships simply don’t have experience working with bankruptcy customers, so they don’t have an understanding of their needs or how to deal with them. In addition, unless the dealership has specifically developed a network of lenders who work with bankruptcy customers, the lenders they do work with may not want to lend to bankruptcy customers.

With all the people filing bankruptcy these days, you might wonder why there aren’t more dealerships willing to work with bankruptcy filers. In part, it’s because of geographical limitations. In smaller cities or rural areas, there aren’t enough people filing bankruptcy for most dealerships to bother going through the work of learning how to serve bankruptcy customers or develop a network of bankruptcy lenders. In major metropolitan areas, however, it’s a different story. In big cities there is enough of a market for some companies to specialize in serving bankruptcy customers.

Step 5: Apply, Get Approved, and Go Car Shopping!

get approved

Once you find the dealership and lender combination that is ready, willing, and able to work with you as a bankruptcy customer, then you can apply, get approved and go car shopping! But it’s also very important for you to avoid making some of the most common and worst mistakes people make with their open Chapter 7 auto loan, which all revolve around buying the wrong car. Whatever you do, don’t buy one of the following:

An older car with high miles. When you settle for an older vehicle with high miles, you often end up paying a lot more in repairs that you expected. When you add all those repair costs to what you’re already paying for the car, you might have been better off paying a higher price on a newer vehicle with fewer miles that doesn’t need to be in the repair shop all the time.

An expensive luxury car. Filing for bankruptcy gives you the chance to make a fresh start, but it’s up to you to be responsible and buy a car you can afford if you want to rebuild your credit. If you go for an expensive luxury car, you may not get approved. And even if you manage to get approved, what will you do if your circumstances change and the car becomes too expensive for you to keep? Be realistic about your circumstances and what you can truly afford.

A brand-new vehicle. Buying a brand-new vehicle is often a bad idea because of the depreciation factor. In the first several years your new car loses 15-25% of its value each year, which means you’ll be “underwater” or “upside” down on the loan for years to come. When you buy a high-quality used vehicle, it’s the previous owner who already took the big hit on depreciation, which means you’re getting a great car for a lot less money!

A salvage car. Salvage cars are cheap, but almost always come with a host of problems that will start popping up and costing you tons of money in repairs.

A car you can’t afford. The last thing you want to do with your fresh start from bankruptcy is buy more car than you can really afford. If you experience any kind of hiccup with your income, you could end up in trouble. You should avoid even going for anything that results in a monthly payment that would be a stretch for you to make. Set yourself up for success by shopping for vehicles that are well within what you can afford.

A lemon. Cars with prices that seem too good to be true are probably just that! There could be hidden frame damage, flood damage or all kinds of other safety issues that will end up costing you way more than you bargained for.

At Day One Credit, we serve as the go-between to meet all your needs, both in terms of finding you the best Chapter 7 bankruptcy car loan from our network of lenders as well as helping you find the right car for your bankruptcy situation.

Step 6: Surrender Your Current Car (if you have one)

surrender your car

If you have positive equity in your current car, any dealership you work with on purchasing your next car should be willing to take your current vehicle off your hands, even if it’s no longer running, and also offer you a fair price for it as a trade-in. It’s probably wise to get the dealership to value your trade-in before you even say you’re shopping for another vehicle. This forces them to make you as fair an offer as they’re going to make rather than low-ball an offer and divert your attention away from that by focusing on the car you’re going to buy from them.

If you have negative equity in your current car and/or do not want to trade it in, you can surrender your vehicle to your lender.  Ask the dealership you are working with if they can help you with the process as it may take time for the lender to pick up the vehicle.

7. Enjoy Your Ride and Make All Your Payments On Time

timely payments

Your last step is to enjoy your ride! But not just that. You recently filed for bankruptcy, so you know the painful reality of struggling financially. Now you’re getting a fresh start through bankruptcy, which means you can immediately start to rebuild your credit and boost your credit score by making all your car payments on time, every month.

Ready to find out how Day One Credit can help you find the car you need and a Chapter 7 Bankruptcy Car loan? Get in touch or jump right in and apply now!

If you’re in the process of deciding you need to file a Chapter 7 bankruptcy in order to get relief from large amounts of debt, what should you do if you also realize you need to get a different car? Maybe your current situation has made you realize the car you’re driving now is more … Continue reading “How to Get a Chapter 7 Bankruptcy Car Loan”

10 Bankruptcy Car Loan Benefits

bankruptcy car loan benefits

No one wants to declare bankruptcy. There’s a good deal of stigma attached to it. It’s stressful, and even more so when people make you feel like filing bankruptcy is some kind of failure. While it’s true that some people find their way into bankruptcy because of bad choices and poor spending habits, there are many more who have to file through no fault of their own. In fact, the most common reason people declare bankruptcy is because of an illness or accident that leaves them with staggering medical bills they will never be able to pay. Health insurance is great, but it doesn’t always cover everything, and the costs of medical care continue to spiral out of control. Now imagine how you’ll feel if you file for bankruptcy and then discover you need to replace your car as well. More stress! But this is when you need to find out about the 10 Bankruptcy Car Loan Benefits.

General Bankruptcy Car Loan Benefits

general car loan benefits in bankruptcy

There are several bankruptcy car loan benefits that can be gained from any provider who serves up loans to people with challenged credit, including the following:

Improve Your Credit Score. When you realize filing for bankruptcy is the only way you’ll be able to get your debts under control, your credit score will probably be as low as it’s ever been. And then you find out that the bankruptcy will be on your credit reports for at least 7-10 years for other lenders to see. How will you ever get a new line of credit if you need one? But the moment you file is when you have the opportunity to start rebuilding your credit history and moving your credit score up instead of down. There are lenders who recognize that filing bankruptcy is a positive thing. It will either result in your worst debts being totally eliminated (Chapter 7 bankruptcy) or create a reasonable repayment plan that will get you back on your feet (Chapter 13 bankruptcy). Financing the purchase of used car with one of these lenders offers you the opportunity to show the credit bureaus how you can make on-time payments on a new line of credit. This is how you get your credit score moving in the right direction!

Get Out of a Bad Loan. Lots of people in a bankruptcy situation feel trapped by an “underwater” or “upside-down” car loan, meaning they owe more on the vehicle than it’s worth. One of the best potential bankruptcy car loan benefits is the opportunity to get out of the underwater loan and get into a great used car you can actually afford.

Upgrade Your Ride. Other people who have filed for bankruptcy or had one recently discharged are struggling to keep their older car with lots of miles on the road because it keeps needing more repairs, which add up to be quite expensive over time. You may be able to use a bankruptcy car loan to drive a better car with fewer miles on it in good enough shape that it will actually cost you less in the long run!

Better Loan Rates. You might think that being in a bankruptcy situation automatically means you’ll have to settle for the highest interest rates out there on a used car loan. Not necessarily! People who have a horrible credit score who haven’t declared bankruptcy often get the worst rates of all. Why? Because as previously mentioned, the lenders who specialize in serving bankruptcy customers realize that declaring bankruptcy is a sign you’re taking action to improve your situation. When some of your worst debts are wiped away or part of a reasonable repayment plan, your debt-to-income ratio goes down, and bankruptcy lenders may reward you for that with better rates than people with bad credit who haven’t filed. Their debt-to-income ratio is higher and they have no prospects of improvement.

Why Day One Credit

day one credit bankruptcy car loans

There are eight more bankruptcy car loan benefits you can gain if you choose to work with Day One Credit to find financing, including the following:

Deep Experience. Day One Credit was founded by the same people who started the Auto City used car dealership in El Cajon more than a decade. Working with bankruptcy customers to find the financing they need has been a part of the core mission of this team from the very beginning.

Robust Network of Lenders. We’ve spent years putting together the most incredible network of lenders you can imagine. The lenders we work with have special programs to serve bankruptcy customers of all kinds.  When we get all these lenders competing for your business at the same time, you end up with the rates and terms that fit your credit situation.

Affordability. We help many of our customers find bankruptcy car loans that don’t require any down payment at all. Of course, if you’re able to make a down payment, you definitely should. But if you can’t make a down payment, that doesn’t have to keep you from getting the loan and car you need. We’ll also help you make sure you end up with a car and loan you can afford. It doesn’t do any good if you stretch yourself too far and end up delinquent on your payments.

Trusted. The good work we have done on behalf of our bankruptcy customers has not gone unnoticed. Needless to say, our customers are super-appreciative of the results we get for them, as well as our excellence in customer service. We treat each and every customer like a VIP!

Know-How. Because we’ve been doing this work for so long, we know all the common questions people tend to ask, and we are always ready to give the answers that help our customers navigate the bankruptcy car loan process. Our goal is always to educate our customers so they feel confident they are making an informed decision.

Getting a Great Car. We work with a wide selection of late model used cars with low miles to choose from.

Many people view filing for bankruptcy as some kind of ending, but you’ll be much better off if you view it like a new beginning. Bankruptcy laws were designed to give you a fresh start. You owe it to yourself to make the most of this fresh start. And one way to do that is to start rebuilding your credit. Instead of thinking of bankruptcy as something that’s holding you back, think of it as the launching pad into a brighter financial future, because that’s exactly what it is. Now that you know about all 10 bankruptcy car loan benefits, what are you waiting for? The loan and car you need may be just a few clicks away. Get started today!

 

No one wants to declare bankruptcy. There’s a good deal of stigma attached to it. It’s stressful, and even more so when people make you feel like filing bankruptcy is some kind of failure. While it’s true that some people find their way into bankruptcy because of bad choices and poor spending habits, there are … Continue reading “10 Bankruptcy Car Loan Benefits”

How Reaffirmation Affects Bankruptcy Car Loans

Filing for bankruptcy can be a confusing process for first-timers, which is why we always recommend working with a qualified bankruptcy attorney if you want get a fresh start and regain control of your financial life.One thing people often don’t understand about bankruptcy is what reaffirmation means. In this article we’ll explain what you need to know about reaffirmation, as well as how reaffirmation affects bankruptcy car loans when you need to replace your car with an open bankruptcy case.

What is Reaffirmation During a Bankruptcy?

When you file for either a Chapter 7 or Chapter 13 bankruptcy, one of the things you have to do is decide which debts are going to be included in the bankruptcy filing and which ones will not be included. Typically, you’ll be including most or all of your unsecured debts (credit cards, personal loans, etc.). But there are some things you own and are making payments on that you need to keep – like your car. If you want to keep your vehicle in bankruptcy, one way to do it is to enter into a reaffirmation agreement with the lender. The reaffirmation agreement means you’re committed to keeping up your payments on your car loan and will not include that debt in the bankruptcy. After all, you still need a vehicle to get around, right? You should only enter into reaffirmation agreements on debts that are for things you really need to keep – and make sure you can afford to keep up the payments and make those payments on time. Also keep in mind that when you sign a reaffirmation on a car loan, the lender may not report your loan payments to the credit bureaus while the agreement is in place, which means those payments aren’t helping to improve your credit score.

Check to See if Your Car is Exempt from Bankruptcy

Depending on how much real equity you have in your car, it might fall into the exempt property category in California. If your car is exempt, then you get to keep it during bankruptcy without going through the reaffirmation process. In California, you get to choose between two different exemption schemes. Your bankruptcy attorney can help you figure out which one is best for you depending on all the different kinds of property you own. But when it comes to your car, here’s what the two different schemes consider exempt: In System 1 (704) up to $3,050 in car equity is exempt and in System 2 (703) up to $5,350 in car equity is exempt. These figures are updated every three years. Since these are the figures from 2016, new figures will be in April of 2019 to account for changes in the cost of living.

Your equity in the car is the difference between what you owe on the loan and what the car is worth. If you owe more on the loan than the car is worth (meaning you’re “upside down” or “underwater” on the loan), then you have no equity in the car and it cannot be exempted from the bankruptcy. If you want to keep that car, you’d want to enter into a reaffirmation agreement on that debt. But, if you have a car that’s worth $10,000 and you only owe $7,000 on it, then you have $3,000 of real equity in the vehicle, which falls under the threshold of both exemption systems. This means your ownership of the vehicle is protected from creditors during bankruptcy as long as you keep making your payments on time.

Note that if you choose System 2 (703), there is an additional “wildcard” exemption of $1,425 that can be applied to any property you want. Let’s say you have that same car mentioned before that’s worth $10,000 but now you owe only $3,500 on the loan. You have equity of $6,500 in the car, but the vehicle exemption is only protecting $5,350 of that equity. What about the other $1,150 of equity you want to protect? If you want to have it all exempted, you could take $1,150 of your wildcard exemption and apply it to the vehicle so all of your equity is protected from the bankruptcy.

Does Reaffirmation Affect Bankruptcy Car Loans?

It’s important to make sure you understand one aspect of reaffirmation that a lot of people get wrong. Many people think that if they sign a reaffirmation on their car loan, they are somehow “locked-in” on that loan and have to ride it out to the bitter end. Not true! You are totally free to sell that car and get another vehicle if that’s what you need to do, but you need to be careful.

What you need to pay special attention to is whether you have positive or negative equity in the vehicle. If you’ve signed a reaffirmation agreement, some lenders require you to first cover all or at least half of the balance before they will offer you a new loan, and even then the terms may not be very good. If you have positive equity in the car, you should have no problem getting the bankruptcy loan you need, as long as you meet the other eligibility requirements. You can use the positive equity as a down payment towards your next loan. You can also cancel a reaffirmation agreement and then apply for a bankruptcy car loan through a fresh start lending program. The window for canceling a reaffirmation agreement is either before your bankruptcy is discharged or within 60 days of when the reaffirmation agreement was filed with the court (whichever date is later). If you’re past both those dates and want to cancel a reaffirmation agreement, enlist the help of an attorney.

For example, let’s say you signed a reaffirmation agreement on your car loan. By doing so, you committed to keep making your payments on the car loan. But what if you realize keeping up the payments is going to be harder than you thought? Or what if your family is growing and you need a bigger vehicle? Having positive equity in your current vehicle is the best way to ensure you can get a new loan to buy your next car, but even then there is no guarantee. You’ve been making your loan payments and thinking your credit is improving, but if the lender has not been reporting those payments to the credit bureaus, your credit score might be worse than it was before the bankruptcy! And, as mentioned earlier, if you have negative equity in the car, a lender could require you to cover 50% to 100% of the balance of the loan before they will consider giving you a new loan with better terms.

As you can see, this aspect of bankruptcy that’s about property exemptions and reaffirmation agreements can become complex if you have a lot of different kinds of property. You have to figure out which of the two different California exemption schemes is the right one for you, and then also determine if you should do a reaffirmation on your current car loan. This is why Day One recommends you work with experienced bankruptcy attorneys. And if you need to replace your current vehicle after filing bankruptcy, keep Day One in mind for bankruptcy car loans. Our process is fast and gets results for you. Contact us for more information or start our online application now!

Filing for bankruptcy can be a confusing process for first-timers, which is why we always recommend working with a qualified bankruptcy attorney if you want get a fresh start and regain control of your financial life.One thing people often don’t understand about bankruptcy is what reaffirmation means. In this article we’ll explain what you need … Continue reading “How Reaffirmation Affects Bankruptcy Car Loans”

10 Bankruptcy Car Buying Mistakes to Avoid

bankruptcy car buying mistakes

When you realize that the mountain of debt you’re facing for whatever reason is way more than you’ll ever be able to handle, filing for bankruptcy offers you a way out. In a Chapter 13 bankruptcy, you’ll work with an attorney and the bankruptcy court to come up with a reasonable payment plan that will get your debts back under control – something that can take anywhere from 3-5 years to achieve. In a Chapter 7 bankruptcy, all your worst debts are completely eliminated, leaving you with only those you need to maintain (such as your house, car, and student loans). The decision to file and the process of filing for bankruptcy causes a lot of stress for most people going through it. If they discover they need to replace their car, the added stress causes many people to make one or more of the 10 bankruptcy car buying mistakes. This article explains each one, and how you can avoid all of them.

1. Paying Cash for a Car

paying cash for a car

People with fantastic credit who can pay for a car in cash should always feel free to do so and avoid all the interest payments of a financed purchase. But if you are in a bankruptcy situation, we think paying cash for a car is one of the worst bankruptcy car buying mistakes you can make. Why? Because one of your primary goals in filing bankruptcy is to start rebuilding your credit history and increase your credit score.

What the credit bureaus are looking for is how you how handle new lines of credit. If you pay cash for a car, nothing gets reported to the credit bureaus, which means you won’t gain any credit-improving benefits! One way to start restoring your credit is by financing the purchase of a vehicle and making on-time payments, each of which will be reported to the credit bureaus.

Although the costs of the loan mean you’ll end up paying more than you would with cash, it can be worth it in order to improve your credit score. You’ll end up having more credit options available to you for other kinds of loans like a mortgage to buy a house, a home equity loan to make improvements to your house, and qualify for better credit cards. Can you afford to miss out on all those benefits? Day One Credit has a strong network of lenders who specialize in serving bankruptcy customers, whether it’s a Chapter 7, a Chapter 13, or a recently discharged bankruptcy.

2. Buying from an Unreputable BHPH Dealer

buy here pay here

What is a BHPH dealer? It’s an acronym standing for “Buy-Here-Pay-Here car.” This kind of car dealership offers what some people call “in-house financing.” It means the dealer is not only selling you the car, it is also loaning you the money to make the purchase. This can turn out to be one of the most serious bankruptcy car buying mistakes! If you’re not sure whether or not a dealer is a BHPH, one sign is that they almost always guarantee approval

The problem is that the terms of the loan might be really horrible. We’ve heard that some BHPH dealers are notorious for taking advantage of credit-challenged people by charging grossly high interest rates. Then, to add insult to injury, they often hide all kinds of fees and other inconvenient terms in the fine print of the finance contract. For example, the contract might specify that you have to make weekly payments instead of monthly payments, and if you’re late on just one payment they will repossess the car! No one should settle for those kinds of shady practices.

At Day One Credit, we don’t make loans, we find loans. We send your application out to all the lenders in our network who have special programs for bankruptcy customers. These lenders are competing for your business, which means you’ll end up with the loan that fits your particular credit situation.

3. Purchasing an Older Car with High Miles

older car

When bankruptcy filers assume there’s no way they could ever get approved for a car loan, they often end up trying to spend as little as possible on a car they can buy for whatever little cash they have. What they end up being able to afford without financing is often an older car with a whole lot of miles on it that’s not in the best of shape. But here’s the thing: When you settle for an older vehicle with high miles, you often end up paying a lot more in repairs than you thought you would. If you add all those repair costs to what you’ve already paid for the car, you might realize you would have been better off paying a higher price on a newer used vehicle with fewer miles that doesn’t need to constantly be in the repair shop.

Other kinds of cars you should avoid at all costs are those with salvage titles and those that are clearly lemons. Cars with prices that seem too good to be true are probably exactly that. If you shop the bottom of the barrel, you inevitably get what you pay for, and then some in the form of hidden frame damage, flood damage or all kinds of other safety issues that will cost you way more than you bargained for. Financing a better used car will save you money in the long run, as well as help your rebuilt your credit.

4. Getting a Brand-New Vehicle Instead of Used Vehicle

new car

When you’re in an open or recently discharged bankruptcy situation, you need to make smart choices in order to make the most of the fresh start bankruptcy provides. The smart choice here is to get the most bang for your buck as possible, which makes buying new one of the most common bankruptcy car buying mistakes people make. Why is purchasing a brand-new vehicle a bad idea? The reason is because of the depreciation factor. In the first several years your new car loses 15-25% of its value each year, which means you’ll be “underwater” or “upside-down” on the loan for years. But if you buy a high-quality used vehicle, the previous owner has already taken the big hit on depreciation, which means you get a great car for a lot less money!

5. Choosing an Unaffordable Vehicle such as a Luxury Car

luxury car

This one is a variation on making responsible choices as a bankruptcy car buyer. Can you really afford a luxury car? Would it be a stretch to afford it? What will you do if something changes and your income goes down? At Day One Credit, we help people be realistic about what they can afford. After all, the last thing you want to happen when you’re trying to rebuild your credit is bite off more than you can chew and end up being delinquent on your car payments. What many people don’t realize is that there are more costs to owning a luxury car than just the price tag and monthly payment. Luxury cars cost a lot more to insure, and they’re also going to cost more to maintain and repair when something goes wrong.

6. Failing to get GAP Insurance and Service Contracts

GAP and service contracts

What is GAP insurance? This is an acronym that stands for Guaranteed Asset Protection. It’s a type of insurance that covers any “gap” between the balance of a loan due on a vehicle and what an insurance company pays in the event of a total loss. In case you didn’t know, those two figures rarely match up. The insurance company often pays less for the car than what you still owe on it. No one likes being stuck with payments on a car that no longer exists, and GAP insurance is what protects you from that scenario. Service contracts are another kind of insurance that help pay for maintenance and repairs when needed. Please note that service contracts vary widely in terms of what is covered, for how long, and with what kind of deductible you have to pay. Read the fine print before signing on the dotted line!

7. Replacing a Great Car

great car

You would be surprised how many people in a bankruptcy situation make the mistake of getting a different car when they don’t even need one to being with. Yes, you want to rebuild your credit, and financing a car purchase is one way to do that, but it should never be your only reason to do it, and especially if you already have a great car. Here’s what Day One Credit offers as a rule of thumb in this situation: If your current car is less than five years old, has relatively low mileage, and is paid off or close to being paid off, you should definitely stick with it! There are other ways to start rebuilding your credit, such as getting a secured credit card.

8. Buying a Car for Someone Else

someone else

Whether it’s your child, another family member, or a friend, buying a car for someone else may be a very generous thing to do, but often ends up being one of the worst bankruptcy car buying mistakes you can make. Remember, your top priority with a bankruptcy is to get your credit back into good shape. But when you buy a car for someone else, can you guess who is on the hook if something goes wrong? The answer is YOU! When you’re trying to restore your credit, the last thing you should do is become the one who is ultimately financially responsible for someone else’s vehicle no matter how responsible you think they are.

9. Having a Cosigner Who did Not Also File for Bankruptcy

co-signer

You have to be very careful to understand the situation you have with your current car and its outstanding loan if you decide to declare bankruptcy but had a cosigner on the loan. If you declare bankruptcy but your cosigner doesn’t, the lender can (and probably will) go after your cosigner to collect on the remaining debt. This can cause a great deal of pain and heartache between two people, so be sure you know the details of your current situation. Day One Credit is always happy to help you understand all your options – just contact us!

10. Lacking a Valid License

valid driver's license

Most lenders are going to require that your driver’s license be valid, up-to-date, and not suspended. You should not try to get a car at all if you lack a valid driver’s license because it could land you in some serious trouble. Don’t do it!

If you’re in a bankruptcy situation and you need a car, you won’t find a better option in the greater San Diego area than Day One Credit. Read our Why Day One page and see for yourself!

When you realize that the mountain of debt you’re facing for whatever reason is way more than you’ll ever be able to handle, filing for bankruptcy offers you a way out. In a Chapter 13 bankruptcy, you’ll work with an attorney and the bankruptcy court to come up with a reasonable payment plan that will … Continue reading “10 Bankruptcy Car Buying Mistakes to Avoid”

10 Signs It May Be Time To File Bankruptcy

10 signs to file for bankruptcy

Looking at all the different debts you owe versus what you make in terms of income can be an eye-opening experience. Some people go through life not paying attention to the big picture of their debt and income until something happens that forces them to do it. When the reality of the picture sinks in, it can cause a wave of panic, often followed by despair at what might feel like a hopeless situation. This is when filing for bankruptcy might be your best option to reduce your debts and work towards a brighter financial future. This article describes 10 different signs to help you realize when it may be time to file bankruptcy.

1. Struggling to Pay the Basics

struggle basic needs

If you find yourself having to choose which basic bills you can afford to pay each month and which ones to put off until next time, you’re either not earning enough income to meet your basic needs or have to send off too much of your income to keep up with your debts, leaving less for the basics. This can be the result of losing a job or experiencing a sudden medical emergency not fully covered by your health insurance (if you have health insurance to begin with). If debt payments are getting in the way of meeting your basic needs and normal bills, it may well be time to file bankruptcy.

2. Minimum Payments (or less) on Credit Cards

credit card minimum payments

Missing the occasional payment here and there on a credit card is not a big deal. But if you find yourself in a situation with multiple credit cards and high balances where all you can ever do is pay the “minimum due” amount (and sometimes not even that much), you should definitely look at the rest your finances and see if it all is trying to tell you it may be time to file bankruptcy. Another variation on this problem is when you take a cash advance out on one card to make the payment on another, or if you’re constantly transferring balances to new cards. These are just delaying tactics that won’t solve your credit card debt problems in the longer term. In fact, it typically worsens the problem by allowing the debt to grow over time.

3. Collection Agencies are Constantly Calling

collection agencies

If you’re late on a loan payment, the company holding the loan will probably do an auto-call to remind you to make a payment. If the debt has been turned over to a collection agency because you’ve missed several payments, you can expect the calls to ratchet up in terms of frequency. Ignoring the calls is not a long-term strategy to free you from the mounting pressures of the debts you owe, which means it might be time to file bankruptcy.

4. Using Credit Cards or Personal Loans to Pay for Necessities

personal loans and credit cards

Some people purposefully use credit cards to pay for necessities because they earn rewards for their spending, such as frequent flyer miles and so on. That’s fine if they’re paying off their balance from month to month. But if you’re using credit cards to pay the basics because you don’t have enough money coming in, you run the risk of running up more credit card debt than you’ll be able to handle. This can be a reason to look at whether or not it’s time to file bankruptcy.

5. Debt Consolidation Looks Good

debt consolidation

You’ve seen the offers to consolidate your debt with a company that also promises to lower your overall monthly debt payment. This sounds great from a cash-flow perspective because you’ll have more money each month to spend. It is rarely, however, a good idea in the bigger picture of your financial future. The consolidation gives you a lower monthly debt payment by spreading the payments out over a much longer period of time, which also masks the interest you’ll pay over those years. This can mean you’ll end up paying significantly more than your original debts in the long term. You might be better off exploring whether it’s time to file bankruptcy.

6. Lawsuits from One or More Debt Collectors

lawsuits

If you receive a court summons because you’ve ignored the attempts of debt collectors to get you to pay up, it’s important to understand that you could end up being responsible for all the court costs and other legal fees involved in the lawsuit. Filing bankruptcy will stop the lawsuit in its tracks and help protect you from other actions of debt collectors.

7. Wage Garnishing

wage garnishing

After a lawsuit has been decided in favor of the debt collector, they have legal recourse to do things to get their money, although this varies by state. In some cases they can freeze your bank account. In other cases they can garnish your wages, which means your employer will be required to hold back a certain amount of your paycheck until the debt is paid off. Proactively filing for bankruptcy can prevent these sorts of things from happening. And make no mistake, wage garnishment is not as uncommon as you might think. Some estimates say as many as one in ten Americans have their wages garnished to pay off debts.

8. Foreclosure on Your Home

foreclosure

If you’ve fallen behind on your mortgage payments and foreclosure is looming on the horizon, bankruptcy can be a way to figure it all out and keep your home, either by eliminating many of your debts in a Chapter 7 bankruptcy, or sticking to a reasonable repayment plan over 3-5 years in a Chapter 13 bankruptcy.

9. You’re Tired of Living Paycheck-to-Paycheck

paycheck to paycheck

If every month is a major struggle because of your debt, it’s worth taking time to figure out what’s really going on. If the debts you owe total up to more than half your annual income, it’s unlikely you’ll be able to get your debt under control in the foreseeable future. Missing multiple payments can result in vehicle repossession, student loan default, collection agencies and lawsuits, all of which will keep your credit score going down instead of up. Filing bankruptcy can help you turn that situation around (note that student loan debt is almost never covered by bankruptcy, so you’ll still have to make good on that).

10. Your Income Isn’t Going to Go Up and You’ve Spent Your Savings

savings

Sometimes people who are struggling to keep up with their debts think they can hold out for more income, whether it’s getting a better-paying job or taking on an additional job (or two). But you need to be realistic about this. If the reality is that your income is not going to be going up any time soon, or only by a little bit, then your overall situation isn’t really going to change, which might mean a better approach is seeing it’s time to file bankruptcy. If you look ahead and come up with a real plan to pay off your debts but it’s going to take longer than five years to do it, bankruptcy might be a better option. What often goes along with this is running through all your savings to maintain debt payments and living expenses. If all the savings are gone and you still have more debt than you can manage, it may be time to file bankruptcy. If you haven’t already started spending your savings, then don’t! Protect your long-term financial health and that of your family by exploring bankruptcy as an option.

When one or more of the signs listed above apply to you, then it may be time to file bankruptcy. You’ll need the help of a qualified bankruptcy attorney to ensure it’s the right option for you and to make it happen. Day One Credit is pleased to recommend any of the lawyers listed on our Bankruptcy Attorney Page.  Alternatively, also check out our post on how to choose a good bankruptcy lawyer.

If you are considering filing bankruptcy or have recently filed and realize you need to replace your car, Day One Credit specializes in finding bankruptcy car loans to help you get the vehicle you need without your bankruptcy getting in the way. Our goal is simple: Helping each customer going through bankruptcy find the car and loan they need while also helping them rebuild their credit. Feel free to contact us to speak with one of our friendly customer service representatives to learn more about how we can help. You can also get started right away when you apply online with our easy online application, which will give you an answer in a matter of minutes thanks to our network of lenders who all compete for your business. This is how we find the loan option that fits your situation!

Looking at all the different debts you owe versus what you make in terms of income can be an eye-opening experience. Some people go through life not paying attention to the big picture of their debt and income until something happens that forces them to do it. When the reality of the picture sinks in, … Continue reading “10 Signs It May Be Time To File Bankruptcy”

Bankruptcy Car Loan Guidelines

bankruptcy car loan guidelines

Every time a lender makes a loan to a borrower, they’re taking a big risk. How can a lender know if the borrower will make on-time payments? How will the lender know the borrower won’t default on the loan? They honestly don’t know, which is why lending is a risk. But through experience, lenders have discovered ways to help them predict the chances of default.

What the lenders do is look at particular data and characteristics related to a borrower to assess the level of risk in making a loan to that borrower. As lenders refine this risk-assessment process, they often also create loan guidelines borrowers can use to see if they’re even eligible. This helps save time by preventing people from applying for a loan who would most likely be rejected anyways. For that to work, however, consumers need to understand the financial terms used in loan guidelines. This article will help you understand the common financial terms you’ll find in bankruptcy auto loan guidelines so you can decide whether or not this type of a loan is right for you.

How Credit Reports and Credit Scores Affect Loan Guidelines

credit reports and bankruptcy car loan

Some lenders have a very clear guideline for a minimum credit score potential borrowers have to meet in order to be eligible to apply for a loan. It’s going to vary widely from lender to lender depending on the level of risk they are willing to take on in making a loan. The higher the credit score requirement, the less risk they are willing to expose themselves to, making it harder or impossible for folks with challenged credit to get a loan through that lender.

At Day One Credit, we don’t have a minimum credit score requirement. In fact, you might qualify even if you have no credit history at all! Because we specialize in finding bankruptcy car loans, we know your credit score is already not good. But because you’re in bankruptcy or recently had one discharged, we also know you’re on the pathway to restoring your credit and doing better. The lenders we work with are the ones who also look past a credit score to serve this group of customers and help them make the most of the fresh start bankruptcy provides.

Payment to Income and Debt to Income ratios: PTI and DTI

income and debt ratios

Many lenders want to take a close look not just at your income, but how much of your monthly gross income (before taxes are taken out) is going to go towards the loan payment. This is a way of making sure you don’t end up with a loan payment you really can’t afford. Lenders refer to this ratio as PTI – your payment to income ratio. But they don’t just take into account the monthly car loan payment. They’re also going to add in your monthly car insurance payment because you need to be able to afford both.

You can figure out your own PTI ratio by taking what you think you can afford in terms of a car loan payment plus an estimate of the monthly car insurance payment, add them together, and then divide that total by your monthly gross income and express the result as a percentage. A lot of lenders who work with people who have challenged credit generally want your PTI ratio to be in the 15-20% range. As an example, let’s say you’re interested in buying a used car but you need to finance it. You have an idea of what you want and think a reasonable monthly car loan payment for you would be $250/month and insurance of about $90/month for a grand total monthly car-related payment of $340. Now let’s say your gross monthly income is $2,400. You take the payment of $340 and divide it by your income of $2,400 and get .14 (rounding down), then move the decimal point over two places to the right and get 14%. This would be an acceptable PTI ration for many lenders. That is, unless you have a lot of other debt payments to make. This is why most lenders will also look at your DTI ratio – your debt-to-income ratio.

Your DTI gives lenders a picture of how much of your gross monthly income has to go to all your debt and bill payments combined together. If most of your monthly income is eaten up with your bills, lenders will question how you can add another significant bill in the form of a car loan payment and insurance. Calculating your DTI is similar to calculating your PTI. The difference is that in the case of DTI what you’re adding together are all your regular monthly bills and debt payments for housing, utilities, and so on. Many lenders get very nervous about making a loan to you if your DTI is more than 50%.

Here at Day One Credit, the advantage you have is the fact that you’ve either declared bankruptcy or have recently had your bankruptcy discharged. This is when your debt-to-income ratio is going to be much better than it was before you declared bankruptcy, and the lenders we work with understand how much this matters.

Day One Credit Bankruptcy Financing Guidelines

Day One Credit bankruptcy car loan guidelines

At Day One Credit, we take great pride in helping people who have declared bankruptcy get the car they need by finding bankruptcy car loans for them. The lenders we work with specialize in this type of lending, and we get them all competing with each other to get your business. This helps you find the loan that best fits your credit situation. We find we can help most people in a bankruptcy situation, but not everyone. We do have our own eligibility guidelines to help you determine whether or not you should apply. Please note, however, that meeting our eligibility guidelines does not guarantee you’ll get a loan. We still have to evaluate your application to make sure we can work with you. If you meet the guidelines below, you should feel free to apply:

Income: We need documented proof of minimum gross monthly income of at least $2,200 per month. You can prove your income with W-2 forms from your employer or with 1099 forms or bank statements if you are self-employed.

Bankruptcy Status: Because we work exclusively with bankruptcy customers, you need to have either already filed for bankruptcy or have had your bankruptcy recently discharged.

Valid Driver’s License: Unfortunately, if your driver’s license is expired or suspended, we cannot help you.

Those are our three most basic eligibility guidelines. But we also find there other cases where we think a bankruptcy car loan is not a good choice for you, including the following:

You Already Have a Great Car: If your current vehicle is still on the new side with low miles, is paid off or close to being paid off, you should just stick with it.

Income is Not Stable: In order for a bankruptcy car loan to work in your favor, your income needs to be stable. If you know your income is about to drop or you’re going to experience a sudden increase in expenses, it would be better not to apply.

Cosigner Bankruptcy Status: Sometimes our bankruptcy customers want to use a cosigner to boost their chances of getting a loan. But if your cosigner didn’t also file for bankruptcy and things go badly with payments, the lender can go after the cosigner.

Our commitment to you at Day One Credit is to help you understand the details of your own credit situation and give you a realistic picture of what’s possible. We aren’t going to let you take on a loan payment you can’t afford because that is simply not helpful.

The other piece of good news about working with Day One Credit to find a bankruptcy car loan is it’s one way to start rebuilding your credit after bankruptcy. This pathway to restoring your credit means finding a new loan and making on-time payments. Some lenders won’t give you the time of day with a bankruptcy on your credit history, but it’s our whole mission to work with bankruptcy customers!

There are lending programs in our network that don’t require any down payment, and we will also help you find an affordable used car that’s right for you. If you meet our basic bankruptcy car loan guidelines, you can start the process online at our website when you fill out our easy online application. If we need to clarify any of the information on your application, we’ll contact you. And then you’ll hear back from us in a matter of minutes! But if you have more questions about how all this works, please feel free to contact us – we’ll be happy to talk you and help you understand everything you need to know!

Every time a lender makes a loan to a borrower, they’re taking a big risk. How can a lender know if the borrower will make on-time payments? How will the lender know the borrower won’t default on the loan? They honestly don’t know, which is why lending is a risk. But through experience, lenders have … Continue reading “Bankruptcy Car Loan Guidelines”

Do Credit Repair Services Work?

credit repair services

Having a bad credit score can keep you from getting the loan or credit card you need. If your credit report is long and complex with lots of past issues, you’d be surprised how many of them probably shouldn’t even be on there anymore. Things don’t get fixed automatically on your credit report even though they should. Cleaning up your credit history can go a long way towards improving your credit score and getting back on track to where you want to be financially. But when you sit down and look at your credit report, it’s hard to know where to begin and what to do about it. For this reason, many people wonder whether or not credit repair services work. This article will give you some advice about whether or not to work with a credit repair company.

Credit Repair Services are Not Free

cost of credit repair services

The most important thing to realize about credit repair services is that they come with a cost. There are many companies out there who claim they can help you improve your credit score by finding and fixing things on your credit report. And they’re going to charge fees to do it. How much you’ll be charged and how long it will take varies from company to company, but here’s how CreditKarma describes it:

“Depending on the company, you might pay a one-time flat fee, or pay for each derogatory mark the company removes from each of your reports. This may start around $35 per deletion and could range to $750 or more. The company may also charge by the month, ranging from $50 to $130 or more. You might also pay setup fees or a fee for accessing your credit reports.”

Please understand that anything a legitimate credit repair service does you can do yourself and it won’t cost you a dime. The caveat, of course, is that it does cost you time, and quite a bit of it, to do it on your own. So a big part of your decision about whether or not to use a credit repair service has to do with whether or not you can afford to pay for it or are willing to roll up your sleeves and do it yourself.

What Should be Your Credit Score Goal?

credit score goal

The simplest answer to this question is better than what it is now, right? But it helps to know how lenders view different levels of credit scores. The most commonly used credit score that lenders and creditors look at is FICO. Your FICO credit score can generally range from 300-850. It is usually interpreted as follows:

Less than 580 = Poor

580 to 669 = Fair

670 to 739 = Good

740 to 799 = Very Good

800 and above = Exceptional

Each and every error you find and fix on credit report, every old bad-mark that can be removed if enough time has passed, will improve your score. This could be really important if you’re right on the edge being able to bump yourself into the next better category. That’s when it’s really worth putting some time and effort into seeing what you can fix yourself to get you where you want to be.

Finding Legitimate Credit Repair Services

legitimate credit repair services

If you decide you don’t have the time to fix your credit report yourself and can afford to pay for a service, how can you figure out which companies are legitimate and which ones aren’t? This is important because there are plenty of both out there! Here are some signs that a credit repair company may NOT be legitimate:

They want to charge you for your credit report. You are entitled to a free copy of your credit report once a year from the three major credit bureaus (Equifax, TransUnion, and Experian). Any credit repair company who wants to charge you for it shouldn’t be trusted. If part of what you want credit repair services to do for you is monitor your credit report on a monthly basis, there are plenty out there who don’t charge anything for it, or charge very little for it.

They want to charge you up-front for services. You should never have to pay a bunch of money up-front to get started with credit repair services. The most legitimate companies will only charge you based on their performance and getting results for you.

There are no real people to talk to. A credit repair service you can get started with totally online without talking to a real person could be a scam and should not be trusted.

Read customer reviews. See what other customers have to say about working with the company. But don’t trust the reviews on the company’s own website, where negative reviews may be filtered out. Go with independent sites like Yelp, Google, Trustpilot and others. Although there is still a chance that some of the good reviews are fake, the bad reviews are probably real.

Unrealistic promises. A good rule of thumb is that if it sounds too good to be true, it probably is. For example, there is probably negative information in your credit report that is accurate and should be there – any company that says it can remove that kind of information is not legitimate. Any company that guarantees a substantial increase to your credit score should be avoided because there’s no way such an outcome can be guaranteed. And if a company says it can legally create a new identify for you, run away as fast as possible!

As you can see, there is a lot to watch out for when it comes to finding a reputable credit repair company. This is because it’s also an industry known to be full of scammers. So here’s the thing: If you can do the kind of research it takes to identify legitimate credit repair services, you’ve definitely got the skills to do your own credit repairs if you have the time. It also pays to know your rights. As noted in a NerdWallet article:

“Just as laws protect you from unfair reporting and collections, there are laws to protect you from credit repair companies that mislead. The Credit Repair Organizations Act requires companies to give you a three-day right to cancel without charge, a firm total on costs and an estimate of how long it will take to get results.”

If you’re serious about wanting to improve your credit score but want help doing it, consider going with a credit counseling agency instead of credit repair services. Credit counseling is usually a free service offered by a non-profit financial education organization whose mission is to help people get better control of their finances and debts. But if you go to one of these and they say they want to charge you for services, then it’s not something you should do. Search your state’s government website to find out about any free credit and debt counseling services they may offer.

Rebuilding Credit with a Bankruptcy Car Loan

Day One Credit bankruptcy car loan

One way to begin rebuilding and restoring your credit after declaring bankruptcy or having a bankruptcy discharged is with a new line of credit and on-time payments. Day One Credit works exclusively with bankruptcy customers to match them up with a lender who specializes in bankruptcy lending to help your make the most the fresh start bankruptcy gives you. We’ve spent years building an amazing network of lenders, and when you apply through Day One, they will all be trying to get your business, and that’s the kind of competition that helps ensure you’ll find the loan that fits your situation.

While we find we can help most people, not everyone is eligible, so be sure to visit the Day One home page and scroll down to “Day One Eligibility Guidelines” to see who we can help and who we can’t. Whether you’ve filed a Chapter 7 bankruptcy, a Chapter 13 bankruptcy, or have had one recently discharged, Day One is ready to help you find the loan and the car you need. In fact, when you fill out our fast online application, you can get an answer back in minutes!

There are many potential benefits to be gained by working with Day One to find a bankruptcy car loan. Besides helping you get your credit back on track, you may be able use it to get out from under a bad car loan. If you owe more on your vehicle than it’s worth, we may be able to help you get out of your upside-down or underwater car loan and get a better deal. We’ll also help you find a great car – something used to get the most bang for your buck, but as recent a model as possible with lower miles and in great shape so you’ll spend less in the long run on repairs compared to an older used car. At the same time, you’re avoiding the huge hit in depreciation you take with a brand-new car. Trust us, we’ve got this figured out through years of experience!

You may have questions about how all this works. Start out by visiting our common questions page to see if the answers are there. If not, contact us and we’ll be happy to talk to you!

Having a bad credit score can keep you from getting the loan or credit card you need. If your credit report is long and complex with lots of past issues, you’d be surprised how many of them probably shouldn’t even be on there anymore. Things don’t get fixed automatically on your credit report even though … Continue reading “Do Credit Repair Services Work?”

Best Cars Choices for Bankruptcy Car Loans

bankruptcy cars

Whether you’re in the middle of or about to file for either a Chapter 7 bankruptcy or a Chapter 13 bankruptcy, getting the car you need is possible with a bankruptcy car loan. But one thing you have to consider very carefully is what you’ll select for your next ride. This article provides guidance on bankruptcy car loan car choices so you’ll have the information you need to make an informed decision.

Is a Bankruptcy Car Loan a Smart Choice?

bankruptcy car loanFiling for bankruptcy might be the best thing you can do when you want to retake control of your financial life and get out from under a mountain of debt. But what happens when you discover you also need to replace your car at the same time? If you haven’t already filed for bankruptcy, work with a qualified bankruptcy attorney to determine if you should file. If you do file, then you can start working with lenders who specialize in bankruptcy car loans. They may even be able to get you an interest rate better than trying to get a traditional loan before you file. This is because some lenders are only going to look at your low credit score and reject your application. But with bankruptcy car loan specialists, they will look past your low credit score to see how you’re taking actions to eliminate or reduce your debts, which puts you in a better position to take on a new car loan.

What NOT to do with Bankruptcy Car Loan

bankruptcy mistakes

Remember that the whole point of filing for a Chapter 7 bankruptcy or Chapter 13 bankruptcy is to make a fresh start. You want to make smart choices to make the most of your second chance. Unfortunately, we’ve seen far too many people make one or more serious mistakes. Here are seven things you don’t want to do:

Don’t buy a car for cash.

This would be a serious mistake if you have filed for bankruptcy. Why? Remember that filing for bankruptcy means your credit score is in serious disrepair. One of your primary objectives should be rebuilding your credit so you’ll be in good shape for your financial future. Paying cash for a car won’t help you rebuild your credit. One way to rebuild your credit is to get a new loan and make on-time payments. A bankruptcy car loan is a great way to do this.

Beware of a BHPH car loan.

BHPH is an acronym that stands for “buy-here-pay-here” car dealerships, meaning they offer what is called “in-house financing.” Be sure to find out if it is a reputable dealer! We’ve heard that some BHPH dealerships are notorious for saddling customers with horrible loan terms. At Day One, we rely on a network of fresh start program lenders we’ve developed over years of helping bankruptcy customers.

Don’t buy an older car with high miles.

When you make the mistake of buying an older vehicle with high miles because the price seems too good to pass up, you’re running the big risk of paying a lot more over time in repairs because the car isn’t in good shape.

Don’t buy an expensive luxury car.

Even if you were to get approved for a loan to cover an expensive luxury car, this would be a mistake because the monthly payment is probably going to be a big stretch for you. Then you may be shocked at how expensive it is to maintain and insure a luxury car properly. Before you know it, you’re trapped in a loan and a car you can’t handle financially, which is the exact situation you don’t want to be in when you’re trying to restore your credit after a Chapter 7 bankruptcy or a Chapter 13 bankruptcy.

Don’t buy a brand-new vehicle.

Buying a brand-new vehicle seems like a good idea because you know it ought to be reliable for years, but what you’re not considering is the depreciation factor. A new car drops in value by at least 10% as soon as you drive it off the lot, and continues to depreciate by at least another 10% during the first year. It continues to depreciate by anywhere from 15-25% for another several years. The downside of this is that you’ll be “underwater” or “upside” down on the loan for years, meaning you’ll owe more on the loan than the car is worth. Buying a high-quality used car that’s a newer model with lower miles means you don’t take as much of a hit from depreciation – the previous owner took the hit. You get a lot more car for a lot less money when you buy the right used car.

Don’t buy a salvage car.

Salvage cars seem like an attractive choice because they are so cheap, but buying one is one of the worst mistakes you could make. On the surface it looks like it’s fine, but how do you know it was repaired properly? Salvage vehicles almost always end up having all kinds of serious problems that end up costing you way more to fix than you could imagine. We recommend never buying a salvage vehicle!

Don’t buy a car you can’t afford.

When you’re trying to rebuild your credit after filing a Chapter 7 bankruptcy or a Chapter 13 bankruptcy, you need to be very careful about how much new debt you take on with a bankruptcy car loan. If you aim too high and buy a car you really can’t afford, you could end up missing payments or defaulting on the loan, which won’t help your credit. By making sure you buy a car you can afford, you’ll be able to make the on-time payments needed to restore your credit. Stay on the safe side and set yourself up for success with a car you can definitely afford.

Best Cars for Bankruptcy Financing

best bankruptcy cars

By listing seven of the big mistakes we’ve seen people make when they need a car during or after a Chapter 7 bankruptcy or a Chapter 13 bankruptcy, it should now be clear what you should focus on to make smart choices with a bankruptcy car loan: You want to spend time figuring out what you can comfortably afford for a payment, then find a newer used car in great shape with low miles. Here are the kinds of cars satisfied customers have purchased recently with a bankruptcy car loan:

Nissan Altima

Hyundai Sonata

Toyota Camry

Toyota Corolla

Kia Optima

Hyundai Elantra

Nissan Sentra

Honda Accord

Dodge Journey

These are the kinds of cars that our customers have found to be reliable and affordable choices for a bankruptcy car loan.

But there are some other smart choices you can make that will help ensure you get the most out of your purchase and protect yourself financially. One of the most important things is making sure you get GAP (guaranteed asset protection) insurance. If your car gets totaled, the insurance company is going to pay out the market value of the vehicle. The amount of the insurance payment will probably not be enough to cover the full balance of what you owe on your loan. GAP insurance will cover that difference – and it’s an inexpensive way to make sure your loan will be paid in full if the car is a total loss.

It might also make sense to purchase a service contract with your vehicle. If your car suddenly breaks down or needs repairs, a service contract takes the sting out of getting the work done. Service contracts vary in terms of how long they last, what is covered, and whether or not there is a deductible. They often include roadside assistance and rental car reimbursement as well. At Day One, we’ll help you figure out what kind of service contract will best serve your needs.

Day One Credit: Your Bankruptcy Car Loan Specialist

Day One Credit

If you’re dealing with a Chapter 7 bankruptcy or a Chapter 13 bankruptcy but also need to replace your car, Day One Credit is ready to help you make all the smartest choices to find a bankruptcy car loan. Our network of lenders are the ones who specialize in meeting the needs of bankruptcy customers, and when they compete for your business, you come out ahead! Our fast online application process will get you an answer in a matter of minutes and you’ll be ready to make the most of the fresh start filing bankruptcy gives you to rebuild your credit. Need more information or have questions? Contact us today!

Whether you’re in the middle of or about to file for either a Chapter 7 bankruptcy or a Chapter 13 bankruptcy, getting the car you need is possible with a bankruptcy car loan. But one thing you have to consider very carefully is what you’ll select for your next ride. This article provides guidance on … Continue reading “Best Cars Choices for Bankruptcy Car Loans”