How to Get an Auto Loan After Repossession?
A repossession is a situation that occurs after a car buyer fails to clear off a loan. Once the individual fails to repay, a repossession agency is employed to retrieve the car and sell it at auction. While most repossession cases occur as soon as a single installment is missed, some lenders provide a grace period.
Repossession of cars entails some amount of costs to the seller. He has to pay the agency a commission to recover and store the car until the auction sale. It is to be noted that the price at which the car gets sold may or may not be rewarding for the seller.
Getting an auto loan after repossession can be challenging because your credit score gets affected by it. You can offset the negative impact of car repossession, either partly or entirely, by working on the positive credit factors. Getting a loan then becomes a lot easier. Here are a few tips to follow:
Find a cosigner
You can quickly increase your creditworthiness by finding a cosigner, who promises to repay the loan on your behalf, in case you are not able to. You only have to ensure that your cosigner has a good credit score so that lenders change their negative risk perception of you.
Check all your debts
Before you apply for an auto loan, make sure that your credit profile is up to date. You should check if there are any pending payments or high-debt burden on your credit report and clear them off so that you get approved by the lender easily.
Increase your down payment
The more you pay initially, the less you pay monthly. A larger down payment not only reduces the principal amount but also the interest amount you have to pay on a recurring basis. It's not just about getting lenders' approval but also about how much your pocket can support.
Lastly, you should be honest about your credit past while approaching a lender. Explain why your car was repossessed and why you are looking for an auto loan. Transparency in communication will help lenders find the best scheme that suits your credit situation.