How to Get a Car Loan After Foreclosure
Bad Credit Car Finance Tips
In the past few years, several lenders have become more flexible in considering people who may have home foreclosures in their credit history. In the past few years, difficult economic times have made it clear that some people have faced foreclosure in dealing with home financing. However, having a home foreclosure in your credit history or bad credit as a result does not have to eliminate consideration for a car loan. Individuals should instead understand that there is a separate process for getting a car loan with bad credit and the factors that help lenders make these decisions. For example, many people do not realize that if home foreclosure is the result of a person losing their job due to the recession, the lender is more likely to review the application.
Bad Credit Car Loans
Prior to the recent recession, the popular understanding was that anyone who had home foreclosure on their credit would no longer quality for an auto loan. In particular, financial specialists advised people who within foreclosures within the past seven years to avoid applying for auto loans altogether. Home foreclosures usually resulted in immediate denial in applications for all other lines. This remained the case even if the foreclosure was the only poor incident on the credit report. Since bad credit information remained on the report for seven years, most people had to wait that amount of time and start over. Now, people can take other routes to get the loans they need.
How to Secure a Car Loan after Home Foreclosure
To start, here are the most important tips to keep in mind when applying for a new auto loan following a home foreclosure:
- It is a popular misconception that lenders take into consideration whether the applicant lives on the property that experienced foreclosure. The applicant's current living location does not have this affect on the application. What matters instead is the debt to income ratio of your current earnings budget.
- If you currently live in the foreclosed property, you must list your monthly mortgage payment on your loan application. The lender will then calculate your debt to income ratio. The current mortgage payment will be taken into account to determine your loan.
- If you no longer live in the foreclosed property, you most list the monthly rent or payments toward your current residential location. The lender will then calculate the debt to income ratio for the location in which you live. These current payments will be taken into account to calculate your loan.
- It is a common misconception that lenders consider the stage of the foreclosure case or contact agents within a foreclosure agency. The foreclosure agreements are considered separate from the auto loan application and treated as such.
Car Loan Approval
The primary concern of an auto lender is the applicant's likelihood of repaying the loan. Good lenders will work with applicants who qualify for new loans because this is how they become successful lending agencies. Regardless, a lender will consider the applicant's debt to income ratio and other factors to decide whether they meant lender approval. If the applicant cannot meet these qualifications, they are less likely for loan approval.
Due to today's financial climate, there are many lenders who are willing to approve applicants with bad credit due to home foreclosure. These lenders usually look at credit history rather than automatically denying a person due to a single incident on their report. Applicants are more likely for approval if they practiced other good credit habits before the foreclosure.
Lenders are known to give applicants more consideration if bad credit is the result of difficult circumstances rather than bad credit habits overall. With tough economic times, many people struggle with credit due to financial emergencies such as getting laid off. The applicant can prove ability to act responsibly with a loan if other credit habits are positive.
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Although a home foreclosure is difficult, it should not control your financial future. There are lenders willing to consider borrowers with bad credit under certain circumstances. As a word of caution, be sure to avoid companies that promise a loan in exchange for buying a car through the company. Even if you make payments on time, these companies are not required to report good credit habits to bureaus. These days, you have options to get a lender who will consider your credit history with the loan application and report payments that improve credit in the long run.