If your ride has been repossessed, you may be wondering whether you’ll ever be able to buy a car again. While you’re not going to get those zero percent financing rates advertised on commercials, it’s possible to get another loan approved even after you’ve lost a car for failure to make the payments. However, getting that approval is going to cost you both additional time and money.
Contact the Previous Lender
Repossessed cars often are sold at auction to satisfy the debt. If that’s the case with your car, and the amount secured at auction was enough to pay off the balance of your loan, ask that lender for a letter of satisfaction that stipulates your car loan was paid off in full after repossession. That’s a sign to other lenders that there’s a better chance they’ll be repaid. If you still have a balance on the loan after repossession, pay that off as soon as you can, since this also indicates you'll repay what you borrow.
Fix What You Can
Contrary to what scam artists portray on the Internet, there’s no quick fix that erases bad credit. However, to get approved after a repossession you should at least be able to show that you’re back on the right track. Get a copy of your credit report. If you notice any errors, fix them by contacting the credit bureaus and disputing the debt. Bring any late payments current, and make arrangements to settle balances in collection.
Put Money Down
A high down payment can help overcome the negativity a repossession brings to a credit report. It shows you have enough control over your finances to be able to come up with that kind of money and it gives you a greater stake in the car. Lenders will be more comfortable loaning money to subprime customers if they know that the car’s going to be worth more than the amount they’re lending you to complete the purchase. Putting 20 percent down in cash rather than relying on a trade-in likely will impress potential lenders.
Papers and Patience
When you’re trying to get approved after a repossession, you’ll be in the subprime loan market. Subprime loans are riskier bets from the lender’s perspective, which means both a higher interest rate and more due diligence in the verification process. You’ll probably have to provide more evidence of financial stability, such as bank statements, pay stubs, utility bills and even your last tax return. Even if you get approved, you can expect to pay a high interest rate and perhaps some additional fees to be granted the loan. The longer you can wait to purchase a new car, the better off you’ll be because your repossession will be further in the past. If you can wait six months, your credit score should rise, and after a year or two you should qualify for a lower rate.