When can I get a car loan after a repo?
There is no indication that you cannot apply for an auto loan immediately after a repo, but the hardest part is being able to qualify for the loan. Since many auto lenders do not approve borrowers with a repo that is less than a year old, you may need to consider internal financing.
Repossessions and your next car loan
Unfortunately, most traditional auto lenders don’t work with borrowers who have a recent repo on their credit reports. When we say traditional, we are talking about lending institutions such as banks, credit unions, online lenders, and captive lenders of certain car manufacturers. These lenders often require a good credit score and clean credit reports.
Where does that leave you? Well, probably internal financing is the next logical step if you need a car loan after repossession.
Learn more about internal financing
Buy here Pay here (BHPH) dealers use internal funding. This mode of auto financing involves working with the dealership who is also your lender. There’s no need to find a third-party lender or pre-approval – the dealership takes care of it all. This setup can be convenient, and often borrowers can leave with a vehicle the same day they are first fielded.
Since these dealerships may not check your credit reports to determine your auto financing eligibility, your recent repossession is usually not a problem. If you can meet the income requirements, prove you have a stable job, get auto insurance, and prove your identity, you could get into a vehicle after a repo with internal funding.
Here are some more details about internal funding:
- Used cars only – BHPH dealers only offer used vehicles. However, used cars are a good option for bad credit borrowers. They’re almost always cheaper than a brand new car, and an affordable price is a good price when you need to get back on your feet after a repo.
- Anticipate a higher interest rate – Without a credit check, lenders take the risk of approving a car loan without knowing much about your credit history. To compensate for this, they tend to award higher interest rates. A high interest rate can be considered a good compromise for an auto loan with bad credit in many cases, especially if you rely heavily on a vehicle to get you through.
- Credit repair may not be an option – If you get a car loan from a lender who doesn’t check your credit, your on-time payments may not be reported to the credit bureaus. If you want to repair your credit with a car loan, ask the lender about their credit scoring practices before signing on the dotted line.
- Down payments are required – Not much is certain in the world of auto credit, but one thing you can count on is need a deposit if your credit is far from perfect. BHPH dealers often require a down payment of up to 20% of the vehicle’s selling price.
- Prepare your documents – Although a BHPH dealer will not check your credit, they are likely to ask you questions about your income and possibly your work history. You need proof of income to qualify for a car loan no matter which lender you work with, so prepare at least a month of computer generated check stubs. If you don’t have W-2 income, have copies of your last two or three years of tax filing.
Looking to the future after a repo
After a year, your auto loan options open up a bit more and you are more likely to qualify for a subprime auto loan. Subprime lenders are equipped to help borrowers with bad credit. These lenders offer you a chance for credit repair because they declare their loans and work with poor borrowers.
If you need a vehicle quickly, a BHPH dealership could be your first step to get back on the road. Once a certain amount of time has passed and your repossession loses some impact on your credit reports, you can try an auto loan that has the potential to repair your credit.
Here has Express auto loan, we know a thing or two about bad credit auto loans, and we have a nationwide network of dealerships that help bad credit borrowers. We aim to connect consumers and dealers in their area to resolve credit issues. If you need auto financing, start now by completing our free auto loan application form. We will look for a reseller in your area free of charge and without obligation.