Why are fresh start program interest rates so high?

If you’ve declared bankruptcy and are trying to rebuild your credit through a fresh start program such as a bankruptcy car loan, you’ll probably be wondering why the interest rates are so high on this type of loan. It’s all about how risky the lender thinks you are in terms of paying back the loan.

Many lenders won’t even consider giving you a loan if they see a bankruptcy in your credit history. To them, it’s just too risky. They see your bankruptcy as an indication you’re more likely than other customers to default on the loan. These “risk-adverse” lenders are too worried they won’t get their money back.

Then there are lenders who take a more positive view of the bankruptcy on your credit history. They see you’re making a fresh start, trying to do better, and are willing to consider taking a chance you with a loan. But the big-picture data out there still says bankruptcy customers are more likely to default on loans than non-bankruptcy customers. In other words, you’re still viewed as a higher-risk customer, and that’s why the interest rates are higher on a bankruptcy car loan.

Higher interest rates are the price you pay for being a riskier kind of customer for a lender but can also be a life-saver when you need to finance a car purchase and many lenders won’t even give you the time of day.

Related post: Bankruptcy Fresh Start Program: The What And Why

At Day One Credit we are experts at finding the best possible bankruptcy car loans in order to help our customers purchase high-quality used cars. We are not lawyers, we do not give legal advice, and nothing we say should be taken as legal advice. Your first step in anything related to bankruptcy should always be seeking the advice and counsel of a qualified bankruptcy attorney.

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Common Questions

Why are bankruptcy car loan interest rates so high?
The big-picture data lenders look at to determine whether or not they’re going to make a loan to you tells them that customers with bankruptcy on their credit report are more likely to default on the loan. Many lenders won’t consider your application at all because of the bankruptcy. Other lenders are willing to consider bankruptcy customers, but will charge higher interest rates for taking on greater risk.
Quick Reads Quick read tips to make the most of your fresh start

Do I need a bankruptcy car loan after my case is discharged?

When your bankruptcy case is discharged and over, you might think you wouldn’t need a bankruptcy car loan to buy your next ride, but chances are good you will still need one.

Remember that after your bankruptcy is fully discharged, the bankruptcy will still be listed on your credit report for 7-10 years. Many lenders will see it as a red flag and won’t consider you for a car loan. Other lenders might say they will only consider you after at least two years have passed after your bankruptcy discharge, and they still might reject you at that time as well.

If your bankruptcy has been discharged but you can’t find a regular lender who is willing to work with you, that’s when you need to consider applying for a bankruptcy car loan. Lenders who specialize in working with bankruptcy customers are more willing to take a chance on you, and you’ll pay a higher interest rate for them to take on higher risk. But your chances of getting the loan will be much better than with lenders who still view you as too risky even though your bankruptcy has been discharged.

Related post: Bankruptcy Car Loan Timing

When your bankruptcy case is discharged and over, you might think you wouldn’t need a bankruptcy car loan to buy your next ride, but chances are good you will still need one. Remember that after your bankruptcy is fully discharged, the bankruptcy will still be listed on your credit report for 7-10 years. Many lenders … Continue reading “Do I need a bankruptcy car loan after my case is discharged?”

Is there a difference between Chapter 7 and Chapter 13 timing?

The timing of when you apply for a bankruptcy car loan is slightly different depending on the type of bankruptcy filing you make.

If you’re filing for Chapter 7 bankruptcy, the timing is easy. As soon as your case has been filed with the bankruptcy court and you have a court-assigned case number, you can apply for a bankruptcy car loan.

If you’re filing a Chapter 13 bankruptcy, however, the timing is little different. Because a Chapter 13 bankruptcy involves a payment plan put together and managed by a court-assigned bankruptcy trustee or judge, you have to wait a little longer before you can apply for a bankruptcy car loan. Specifically, there are two things that have to happen before you apply for the loan. First, your Chapter 13 bankruptcy repayment plan has to have been finalized and approved. Second, if you want to take on new debt, it has to be approved by the bankruptcy trustee or judge assigned to your case. You’ll need to work with your bankruptcy attorney to add a new post-petition debt to your case. The bankruptcy trustee or judge will review the request to make sure it’s going to work for you within your payment plan. Because most people need a car, your request should be granted as long as the court thinks you can handle the extra payment in your plan.

Related post: Bankruptcy Car Loan Timing

The timing of when you apply for a bankruptcy car loan is slightly different depending on the type of bankruptcy filing you make. If you’re filing for Chapter 7 bankruptcy, the timing is easy. As soon as your case has been filed with the bankruptcy court and you have a court-assigned case number, you can … Continue reading “Is there a difference between Chapter 7 and Chapter 13 timing?”

When should I apply for a bankruptcy car loan?

When you need to finance a car purchase with a bankruptcy car loan, it is important to pay attention to the timing of when you apply for the loan.

If you haven’t yet declared bankruptcy but are about to, you should wait until after you have filed your bankruptcy before applying for bankruptcy car loan. When you’re about to file for bankruptcy, many lenders will see your heavy debt load and will likely to reject your loan application. But you’re also not yet eligible for a bankruptcy car loan until after you’ve filed your bankruptcy. That’s why waiting to apply for the loan until after you file for bankruptcy makes the most sense.

The lenders who specialize in bankruptcy car loans want to see you’re on the path to making a fresh start, which is what filing for bankruptcy does for you. Once your case has been filed and is in the process of moving forward, that’s when bankruptcy lenders can start working with you.

Related post: Bankruptcy Car Loan Timing

When you need to finance a car purchase with a bankruptcy car loan, it is important to pay attention to the timing of when you apply for the loan. If you haven’t yet declared bankruptcy but are about to, you should wait until after you have filed your bankruptcy before applying for bankruptcy car loan. … Continue reading “When should I apply for a bankruptcy car loan?”

Why are fresh start program interest rates so high?

If you’ve declared bankruptcy and are trying to rebuild your credit through a fresh start program such as a bankruptcy car loan, you’ll probably be wondering why the interest rates are so high on this type of loan. It’s all about how risky the lender thinks you are in terms of paying back the loan.

Many lenders won’t even consider giving you a loan if they see a bankruptcy in your credit history. To them, it’s just too risky. They see your bankruptcy as an indication you’re more likely than other customers to default on the loan. These “risk-adverse” lenders are too worried they won’t get their money back.

Then there are lenders who take a more positive view of the bankruptcy on your credit history. They see you’re making a fresh start, trying to do better, and are willing to consider taking a chance you with a loan. But the big-picture data out there still says bankruptcy customers are more likely to default on loans than non-bankruptcy customers. In other words, you’re still viewed as a higher-risk customer, and that’s why the interest rates are higher on a bankruptcy car loan.

Higher interest rates are the price you pay for being a riskier kind of customer for a lender but can also be a life-saver when you need to finance a car purchase and many lenders won’t even give you the time of day.

Related post: Bankruptcy Fresh Start Program: The What And Why

If you’ve declared bankruptcy and are trying to rebuild your credit through a fresh start program such as a bankruptcy car loan, you’ll probably be wondering why the interest rates are so high on this type of loan. It’s all about how risky the lender thinks you are in terms of paying back the loan. … Continue reading “Why are fresh start program interest rates so high?”

How can a bankruptcy car loan help my credit?

A bankruptcy filing stays on your credit report for as long as 7-10 years. While having most or all of your eligible debts wiped away or at least caught up on feels great, that bankruptcy sitting there on your credit report is a big red flag to many lenders when you try to get a new loan or line of credit. How are you supposed to improve your credit history if you can’t take on any new debt? It can feel like you’re stuck. But a bankruptcy car loan is something that could help.

While many lenders won’t work with you because of the bankruptcy on your credit report, there are other lenders out there who understand you’re making a fresh start and are willing to consider you. If you need to finance the purchase of a vehicle, a bankruptcy car loan might be the right option that allows you to not only get the vehicle you need, but also to make on-time payments on the loan that will be reported to the credit bureaus to show responsible use of credit and better managing your debt.

While the terms and rates on a bankruptcy car loan won’t be as good as you’d get if you didn’t have a bankruptcy on your credit report, it’s a pretty small price to pay for the chance to not only get the car you need but also start rebuilding your credit.

Related post: Bankruptcy Fresh Start Program: The What And Why

A bankruptcy filing stays on your credit report for as long as 7-10 years. While having most or all of your eligible debts wiped away or at least caught up on feels great, that bankruptcy sitting there on your credit report is a big red flag to many lenders when you try to get a … Continue reading “How can a bankruptcy car loan help my credit?”

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