Repossessed vehicles on your credit report can make a new lender feel uneasy about the transaction, but believe it or not, you can get approved for a car loan after repossession. it may feel like your world is ending when your beloved car – that you couldn’t afford – is driven off on the back of a flatbed truck, but we promise it’s not. Repossession is a large step backward in your financial life, but it won’t stop you from moving forward again. Lenders have been loosening the reins on car loan requirements in the past few years and are now willing to look at borrowers with problem credit.
A vehicle repo can greatly lower your credit score and leave you in the subprime category, meaning your score is 620 or lower, but luckily there are subprime lenders that will work with you.
Determine Where Your Credit Stands and Repair it
So, you know your credit score is going to be low because of your repo, but it may or may not be as bad as you think. The first thing you should always do when you’re looking for a car loan – regardless of your credit history – is obtain a copy of your credit report and your credit score. Auto loans can be a complicated process and getting approved shouldn’t be your only concern. You want to get favorable terms on the loan as well so you can afford your payment and not end up with a second repossession on your history. This is all determined by what your credit report says to the lender. For example, bad credit can be caused by one or more of the following: -Slow pay -Defaults on loans -Repossession -Bankruptcy -Collection notices
Anyone with these on their reports will be subject to higher interest rate because they pose a higher risk to the lender. Anyone with a credit score above 620 will be subject to lower interest rates because they are less of a risk. If you want to be less of a risk, even with a bad credit auto loan with repossession , you will need to repair some old debt first.
If you are currently behind on a few monthly payments then you will need to bring those payments current. This shows lenders that you are making an honest effort to make good with your creditors. Remember, rebuilding your credit is not an easy or fast process. It takes time, commitment, and discipline to stay on top of all your bills, but it will be worth it in the end when you receive a low interest rate when you are buying a car on credit.
Set Your Goals Realistically
You probably got a cold, hard slap in the face by the reality stick when you saw your car being hauled away, and that’s a good thing. You’ve already been down the road with a car you couldn’t afford the payments on, so let’s not do that again. Instead, you should come to terms with the fact that the car you can afford is not going to be the coolest, newest, or fastest thing on the road. Only look at cars that fit in your budget, and choose one based on the features it has. I mean, do you really need heated and cooled seats, cooling cup holders or a moon roof?. Stick to what you absolutely need for right now, and then once you have made your payments on time and your credit scores have improved, then maybe you can opt for a
fully-loaded new car the next time around.