Can Someone With a Bankruptcy Be Able to Co-Sign for an Auto Loan?

A bankruptcy significantly lowers a person's credit score. Over time, however, a person who claimed bankruptcy can re-establish her credit. If your co-signer recently claimed bankruptcy, she's probably not a good candidate for a loan co-signer. If your co-signer has re-established her credit, you might obtain a loan approval if the co-signer meets other lending criteria.

Recent Bankruptcy

Tara Baukus Mello of Bankrate.com warns that accounts included in a bankruptcy remain viewable to potential lenders for seven to 10 years, depending on bankruptcy type. Bankruptcy affects individual credit scores differently. Even so, a lender may take your cosigner's income and debt responsibility into consideration if you were declined for a loan because of income. If your co-signer recently claimed bankruptcy and you have poor credit yourself, obtaining a loan approval isn't likely.

Re-establishing Credit

As time passes, the impact of a bankruptcy on credit score decreases. After bankruptcy, someone can reestablish his credit by paying bills, loans and other lines of credit on time. If your co-signer has obtained his own car loan or a line of credit since the bankruptcy, his credit might have improved. If years have passed since the bankruptcy and your co-signer hasn't initiated new lines of credit to prove his ability to pay accounts on time, your co-signer hasn't re-established her credit.

Obtain a Preapproval

Apply for a loan preapproval with your co-signer before you begin shopping for a vehicle. Both you and your co-signer can submit a credit application to secure the terms of an auto loan. If your co-signer's bankruptcy still affects his credit and lending risk, your application might be declined or you might pay a high interest rate if approved. Both you and your co-signer will have to provide proof of income. Use a different co-signer if your application is declined.

Considerations

If a lender approved your loan at a higher interest rate or shorter term than your budget allows, you might be able to refinance your loan by yourself at a later date depending on why you needed a co-signer. Making loan payments on time improves your credit rating. If you were declined because of your income or debt-to-income ratio, consider refinancing when you're able to provide proof of increased income or when you lower your debt. If you plan to refinance in the future, make sure your auto loan provider doesn't charge prepayment penalty fees.

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Do You Have to Get Insurance for a Leased Car?

As part of your lease contract, you must carry full-coverage insurance for the entire period of the lease. In fact, you must provide proof of this coverage before you leave the dealership in your new car. Although your salesperson will work with you to set up your coverage and require proof, it is your responsibility to consistently carry the full-coverage policy.

Insurance Coverage

A full-coverage insurance policy covers repairs to your car in the event of an accident or for the vehicle's total loss. It is the most expensive of insurance policies (as compared with a minimum-liability or comprehensive policy), as the insurance company pays for the market value of your vehicle in the event of a total loss. Lenders have different requirements, such as your maximum deductible and coverage limits. Check with your new-car salesperson for limits required by the leasing company.

GAP Insurance

Guaranteed asset protection (GAP) insurance is also a requirement for leased vehicles. It covers the gap between the value and the actual vehicle payoff amount. However, not all insurance companies offer this coverage. Still, the protection is mandatory and you may have to buy it separately through the dealer. In that case, it becomes a portion of your lease payment. Insurance companies pay for the vehicle's determined market value, which does not include the bank's payoff amount. It generally takes about about three years for your vehicle's buyout amount and market value to equal, as depreciation is highest when a vehicle is new.

Insurance Reporting

Your insurance company reports your coverage, or lack thereof, to both your state's motor vehicle office and lender. Your bank is listed as the policy loss-payee, so your insurance company automatically notifies the lender at the time of policy renewal or cancellation. If you do not maintain your policy, the bank has the right to add a policy to your vehicle to protect itself from loss. The cost of bank-added insurance is significantly more expensive than the amount you would normally pay. Your leasing contract should further explain the costs and details for added insurance, or you can call your lender to find out more.

Warning

Again, your lender is listed as the loss payee, not you. When you lease a car, it belongs to the bank; you pay the bank for the time you intend to drive it. With that said, if you do incur a total loss and the insurance company pays it off, you will not receive any money for the vehicle, as it goes directly to the bank. You should consider this before you decide to put money down toward your lease. Putting out money toward your lease may offer you a cheaper monthly payment, but you won't see any of it back should you total your vehicle. This can prove a loss for people who pay thousands down or the entire lease cost upfront.

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How to Sell Used Cars Locally

Finding a buyer for your used automobile may prove difficult. Potential buyers may prefer dealer selections and warranties. Even so, you can successfully complete a private sale of an automobile. The key is recognizing and utilizing different local marketing techniques to attract buyers.

Instructions

1

Determine a fair price. Visit Kelley Blue Book online to research the recommended private party sale price for your used automobile. Price the car fairly to attract attention.

2

Purchase car window paint from an auto parts store. Print "for sale" on the rear window and include your contact number and the asking price for the vehicle. Drive the car as advertisement. Even if you've already purchased a new automobile, occasionally drive your old vehicle around time to attract attention.

3

Use the local newspaper's classified section to advertise your car. Include detailed information on your automobile such as the make, model, year, mileage, and condition in your advertisement. Don't forget to include a telephone number or e-mail address.

4

Take advantage of free web advertisements. Create a detailed car advertisement on Craigslist or your local Autotrader website.

5

Talk with local dealers. Visit a few local dealers to see if they're willing to purchase your automobile. Obtain several quotes before making a decision.

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How to Buy a Vehicle After a Bankruptcy

Some people lose their assets in a bankruptcy proceeding, wherein lenders take possession of their automobiles to repay their debts. Since reliable transportation is a necessity, you may find yourself in the market for a new or used car after a bankruptcy. If you don't have cash to pay for a car outright, you might consider financing a car. While a bankruptcy hurts your personal credit file, it's possible to finance or buy a car after bankruptcy. In fact, buying a car can help your score.

Instructions

1

Rebuild your credit file with a new line of credit. Acquire a secured credit card immediately after your discharge to start rebuilding your credit score. Seek a card from your bank or another financial institution in your local area. Get information on the card, such as the annual fee, monthly fee and the minimum security deposit. Also, make sure the bank regularly reports account information to the credit bureaus.

2

Keep up with your remaining debts. You can exclude student loans and mortgage loans from a bankruptcy proceeding. Retaining these debts and paying them on time each month benefits your credit score and helps you build a better credit history.

3

Start saving money. Down payments are not required for car loan. But if buying a vehicle after bankruptcy, having a down payment can help you qualify for the loan, and it also lowers the loan balance. Typical down payments are 10 to 20 percent of the sale price.

4

Use a co-signer for the vehicle loan. Pick someone with a good credit history, and ask him to co-sign your new auto loan.

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Buying a Second Hand Car

Purchasing a secondhand vehicle is a way to get transportation without paying the exorbitant sticker prices that often accompany brand new cars. However, consumers should be more cautious and educated when purchasing a secondhand vehicle as it can be subject to more problems than new cars. This is attributed to the fact that it was previously owned, which means there may have been problems that were not disclosed by the original owner.

Instructions

1

Conduct research on the type of car you plan to purchase. Choose two or three potential models in case you can't find a used version of the one you want. Figure out the retail price of the newer model as well as the value of the used models, depending on the year. Also research potential costs for maintenance of the vehicle and any necessary upkeep.

2

Test drive a few different used models. You may have every intention of purchasing one type of car, but upon doing a test drive, you might not like the way it drives or handles on the road. Drive several different cars and note the ones that drive well, have good fuel mileage and boast a cozy interior. Pay attention to the various features of each car as you drive it to determine which one would be an optimal purchase choice.

3

Request a vehicle history document from those models you are considering purchasing. This document gives you an idea of the real condition of the car as it details major accidents in which it was involved, major body and/or repair work, flooding or other damage from natural disasters and more. The vehicle history report also gives you a more accurate mileage count, in case the odometer was rolled back to make the car look as though it had less miles on it than it actually did.

4

Take the car to a reputable mechanic before making your purchase. In some instances, the dealer may suggest a mechanic willing to look at the car free of charge. However, it is best if you take the car to your own service professional in the event that the dealer and his mechanic are working together to get the car sold -- at all costs. Ask about any problems your mechanic might foresee with this car as well as the condition of major parts, such as the engine and transmission.

5

Read over paperwork and contracts carefully. Make sure the previous owner does not still owe money for a lien on the vehicle and that the title is completely cleared. Have the previous owner sign the title over to you as soon as you arrange to give him the money for the car and that the person signing the Bill of Sale is actually the owner of the vehicle. If you are working with a dealer, read the fine print on all of your contracts carefully and make sure to get all warranty information before you leave the lot.

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Can a Person With a Very Low Income Get Financing for a Car?

Getting access to a vehicle is important for most people, as it is the way that they get to and from work. If you have a very low income, you may be skeptical about your odds of being approved for vehicle financing. Even though you may not be able to qualify for an expensive car, many dealerships will work with those who have low incomes.

How Much Car Can You Afford?

Before you start looking for financing in this situation, you need to determine how much you have to spend each month on a car. When making this calculation, you need to consider the total amount of money that you will have to pay toward the car, not just the cost of the vehicle itself. You will have to pay for maintenance and fuel for the car as well. You should try to keep your mortgage payment below 20 percent of your net income to allow enough money to live on.

Other Factors

When you start applying for financing for a new car, you will be evaluated based on many factors. The lender will want to know not only what your income is, but also what other payments and debts you have. If you have a very low income, you will be more likely to get approved if you have no other debt and very few payments to make. When you are stretched to the limit financially, you will be less likely to get approved.

Buy Here Pay Here

Even if you have a low income or bad credit, you still may be able to get approved at a "buy here pay here" auto dealer. These dealers offer in-house financing programs and are generally very flexible when it comes to financing customers. As long as you can prove that you have some type of regular income, they usually are willing to work with you. With this kind of dealer you make your payment directly to them, usually on a weekly basis.

Down Payment

You can increase your chances of getting approved for auto financing when you have a low income if you are willing to make a larger down payment. If you have some money in savings, you should consider applying it to the down payment on your car. When you put a down payment on the car, the lender is less worried about financing the rest of the purchase. This decreases the risk of default on the loan and makes the deal more attractive for the lender.

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What Credit Score Is Needed to Purchase a Car?

Auto industry veterans have a saying, "there's [a rump] for every seat". Translated, it means there's a car for everyone. The same can be said for auto financing. Whether your credit is excellent, poor, brand new or somewhere in-between, chances are you'll be able to purchase a car, thanks to the many financing options now available to buyers with a range of credit scores.

"Good" Credit is Relative

Your next car purchase may be easier than you think.

The credit score you need to buy a car can depend in large measure on who finances the car. Credit scores range between 300 and 990, depending on the model used to calculate the score. Likewise, credit score classifications ("excellent," "poor," for example) vary, not only among credit scoring models, but also among lenders. Your 680 credit score may only be considered "good" by Auto Lender A, but "very good" by Auto Lender B.

Type of Lender

If your credit score is high enough, you may qualify for "prime" financing, which, according to Autoloandaily.com, typically requires that your credit score be at least 680. If you're unable to obtain prime financing, however, there are numerous "non-prime," "sub-prime" and "deep sub-prime" lenders that specialize in financing automobiles for borrowers with credit scores as low as 550, sometimes even lower. Additionally, you owe it to yourself to also investigate financing through banks and credit unions, many of which make car loans and whose credit score criteria can vary widely from one institution to the next.

Type of Dealer

If you're among the below-prime borrowers who assume it's easier to finance a used car from an independent dealer than a new (or used) car from a franchise dealer (manufacturer-authorized car dealer), think again. While, in the past, many franchise dealers used financing networks that overwhelmingly consisted of prime lenders, the prevailing economy -- and, by extension, the overall decline in many consumers' credit scores -- has forced many franchise dealers to include below-prime lenders in their networks in order to continue selling cars. Further, several of the big automakers now offer below-prime financing through their proprietary lenders, giving borrowers with a wide range of credit scores easier access to the types of cars they want to purchase.

Down Payment

The amount of your car loan is reduced by the value of your down payment, which can be either in cash or in the form of another car you trade in. The more money you put down, the less you have to finance, the lower your monthly payment and the greater the likelihood that the lender may be more willing to accept a lower credit score.

Considerations

You need to be aware that below-prime interest rates are almost always higher than prime rates -- sometimes much higher -- and can range from less than 10 percent to rates that approach (or even exceed) the levels of some credit cards. The spread between non-prime, sub-prime and deep sub-prime interest rates is even more pronounced with used cars, which, historically, have carried higher interest rates than new cars. Before deciding on a new versus a used car, or before committing to below-prime auto financing, you need to fully understand the effect that a higher interest rate will have, both on your monthly payment, as well as on the total repayment cost of the vehicle over the term of the loan.

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