Can You Get a Car Loan After a Repo?

by Steve Lander
After a repossession, a convertible might be out of reach.

The question isn't whether or not you can get a car loan after you've had a car repossessed, because you probably can. The important question is whether or not you can get a car loan that works for you. Some lenders specialize in working with people that have imperfect credit or repossessions, but getting a loan from them can be expensive. A well-planned approach can help you better understand where you stand and potentially reduce the cost of your loan.

Understand and Fix Your Credit

The first step in dealing with a repossession, as with any credit issue, is to understand where you stand. Ordering your credit report and score lets you see if you have issues above and beyond a repossession. Having one credit blemish is different from having multiple problems. One way to mitigate the negative impact of a repossession is to dispute any other incorrect information on your report, since removing those items can improve your score. At the same time, you might also want to pay down balances, fix late payments and do whatever else you can to get your credit back under control.

Shop Around

While there might not be a great deal of variation between lenders if you have excellent credit, when you have a repossession there's a lot of room for lenders to disagree on what you should pay. One lender might look at it as a problem so serious that it won't lend to you without an onerous interest rate and down payment. Another might look at your credit and think that you are a manageable risk, offering you a better loan. Getting a car loan after a repossession requires a willingness to apply to multiple lenders and compare offers.

Have a Down Payment

With a repossession on your credit, you will probably have to make a down payment when you go to purchase a car. Before a lender gives you money, knowing that you've defaulted on other car loans, it will probably want to know that you stand to lose your own money if you give up your car. Having a down payment also means that you borrow less money, which can be better for you.

Choose a Realistic Car

With blemished credit, you probably won't get qualified for a loan on a dream car and, if you do, it could be very expensive. Finding a car that will get you to and from work or school but that is relatively basic and inexpensive will increase your chance of getting approved for a loan. Not only does the lower loan balance pose less risk to a lender, but the lower payment that you will have also makes it more likely that you'll be able to pay on it.

About the Author

Steve Lander has been a writer since 1996, with experience in the fields of financial services, real estate and technology. His work has appeared in trade publications such as the "Minnesota Real Estate Journal" and "Minnesota Multi-Housing Association Advocate." Lander holds a Bachelor of Arts in political science from Columbia University.

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