Buying or financing a car after a short sale can be frustrating and requires patience. There are a few things that you need to be aware of and some steps that you can take to insure that you buy the car you need.
Buying a Car after a Short Sale: What to Expect
The credit impact of a short sale–selling a home or property at a loss–is significant. Since you will have a lower credit score after a short sale, you need to be aware that you will be offered less favorable terms on any new loans you apply for. First, the length of the loan will be shorter. Traditional car loans last between three and seven years. With a low credit score, your options may be limited to 2-3 years. Secondly, the interest rate that you will be offered will be significantly higher than you may be used to–probably in excess of 10% APR. Last, but not least, you will have fewer choices in cars that you will be able to buy. You may be restricted to base model, low cost new cars or used cars that are less than seven years of age.
Rebuilding Your Credit after the Sale
The best thing you can do is to start rebuilding your credit score. Many lenders are going to want to see that you have either paid or are paying any remaining balance from the short sale. After that you can reestablish a positive payment history. If you have any open credit accounts, be sure to pay them on time each month. If not, then look for credit cards that specialize in bad credit, even if you have to open a secured account. Be sure to pay your balance in full each month or, if that is not possible, keep your balance under thirty percent of your credit limit.
While you are doing that, start building a down payment–it’s always difficult to buy a car without one, even if your credit wasn’t damaged. Depending on your credit score, you will need to have between twenty and fifty percent of the total purchase price as a down payment on a new car. The lower your score and more recent the short sale, the higher your down payment will need to be.
You will also need to be prepared to shop your loan to several specialty lenders. With a short sale on your credit report, you will be hard pressed to find any traditional banks willing to approve your loan application. Credit unions may even balk, but we can help you find a lender willing to look past your short sale and offer you a second chance auto loan. Shopping your loan will allow you to find the most favorable terms possible. Go here to apply online.