Needless to say, any type of repossession could have a negative effect on your credit history. But this does not mean that you cannot get a car loan. However, it is challenging and sometimes impossible to obtain a loan with affordable rate of interest and manageable terms provided that lenders consider it risky to lend money to an individual who has experienced repossession, resulted out of his failure to meet his debt obligation.
As a result, most of the lenders are likely to charge higher interest rate on getting a car loan after a repossession. But, there are some steps that one could take to improve his eligibility for better rate and terms. Remember, getting auto loan after repossession is not the only thing to pay attention to. It is equally important to get a deal that fits in your budget. This is because you will be able to make regular payments on the same and raise your credit score only when you afford loan. Following are some steps to take to improve chances of qualifying for the best possible loan:
Before applying for car financing after repossession, the latest copy of credit report should be examined well. At times, credit report consists of errors or wrong information which adversely project borrower’s creditworthiness to the lender. Such errors should be fixed before applying for an auto loan. Correcting even the smallest of errors could have a positive impact on your credit score. Also, you should determine which aspects of credit report you can improve quickly and get to repair on those aspects right from the beginning. It is advisable to pay as many debts as possible for auto loan after repossession with improved credit score. You need to be more disciplined with your spending and borrowing habits.
Moreover, you should be prepared to provide as large of a down payment as is feasible for you. Most of the subprime lenders seek a sizable down payment as it reduces the risk taken by them. The higher the down payment, the more likely you are to get pre approved for a car loan with bad credit. Apart from this, your income and employment status will also affect your approval chances.