Filing for bankruptcy is a decision that can have massive implications on your financial future. While it will provide you with the fresh start that you need, you will be very limited on what you can do as far as your financial life is concerned. Obtaining a loan after bankruptcy is not difficult if you know what you are doing. Lenders exist to help people with guaranteed loans.
If filing for bankruptcy is the only way for you to get out of debt, but you later find yourself in serious need of an injection of cash, you will likely find yourself having a very hard go of trying to get yourself a loan.
Luckily, one option at your disposal is to consider taking out a car title loan.
Before we go over whether or not a car title loan is right for you, let’s do a quick breakdown of what a car title loan actually is and how they work. To put it simply a car title loan is a secured loan that is based on and tied to the value of the car that you own. The lender will evaluate the value of your car and then offers you a loan based on it. In some cases, car title loan companies will require proof of income or other factors regarding your financial situation, but overall car title loans are known for being incredibly flexible when it comes to credit score checks.
Once your car’s value has been determined, the lender will offer you a loan in exchange for holding onto your car’s title. They will hold onto your car’s title until the loan is repaid. One of the primary selling points of car title loans is that you can still operate your car while the lender has your title. If you default on your payments, however, your lender will have the option to repossess your car. Some lenders even require you to put on a GPS tracking on your car so that they can easily find your car in the event that you do default.
Once you are approved for your loan, you will get the cash you were approved for quite fast, typically within 24 hours of approval., Make sure not to enjoy it for too long though because you’re going to have to start paying back your loan soon. Car title loans are typically short-term loans (repayment periods can last just a month) with incredibly high interest rates (APR up to 300%). If you find yourself not being able to repay the loan within the specific repayment period, you will likely find yourself in even more financial trouble – and without a car to boot!
Getting a loan after bankruptcy can be very difficult, especially if you are dealing with a bank or another major financial institution. If you are in the midst of your bankruptcy and need some extra cash, a car title loan could definitely be your best option.
The reason why a car title loan differs from other personal loans is because instead of looking at your previous bankruptcy or your bad credit history, car title lenders instead look towards the future. Primarily, most car title lenders will base their decision to approve your loan on the value of your car, the equity you hold in your car, and your ability to pay back the loan should you be approved.
How much can I borrow?
Equity is the amount of money your car is worth minus the amount you still owe on it. If you own your car outright, it’s equity will be equal to the value of the car. In order to dictate the value of your car, your lender will likely evaluate your car. Depending on how much your car is worth, you will likely be loaned somewhere between $100 and $10,000.
Any lenders confidence in your ability to pay back the loan will be dictated by a number of factors. Many lender will ask for paycheck stubs, bank account statements, and more.
It is important to note that your chances of receiving a car title loan may differ depending on what type of bankruptcy you had filed.
Chapter 7 Bankruptcy and Car Loans
If you filed for Chapter 7 bankruptcy, you have affectively elected to allow of your debt to be eliminated or discharged. This type of bankruptcy allows for your assets to be liquidated with all of the proceeds being distributed to your creditors.
In terms of a car title loan, lenders will often want you to receive a discharge once the meeting with your creditors has taken place before they considering offering you a loan. If the meeting with your creditors has yet to take place, you may not be eligible for a car title loan.
In the case of Chapter 13 bankruptcy, you will need to get permission from your trustee before you are able to apply for a car title loan. Because your Chapter 13 plan is designed to help you get out of debt based on the amount that you owe, your trustee is going to need to be informed before you can incur any more debt.
If you’re having second thoughts about taking out a car title loan following a bankruptcy, one thing to keep in mind might be the positive impact it can have on your credit report. After you file, your bankruptcy will appear on your credit report for 10 years. That will make it hard to get any type of loan throughout that time. If you are able to take out a car title loan and pay it back within the repayment term, you will have a sign of positive and responsible borrowing in your report as well. That might make it easier for you to obtain a different kind of loan during that 10-year period and is an added benefit that comes with the money you borrowed with your loan.
There is no to denying that declaring bankruptcy makes taking out any kind of loan harder to be approved for, even a car title loan. Still, the truth is that car title lenders will be the most likely to work with you after bankruptcy.
To find out more about what your options are, do some searching around for car title lenders in your area to see how they approach offering loans after bankruptcy.