Buying a Car After Bankruptcy (and Foreclosure) – Part 2

Part 1 covered t he beginning process and pain points of trying to re-establish new credit after my bankruptcy in 2011 and foreclosure (March 2012). The whole reason behind even venturing into this territory before I’m even a year removed from my bankruptcy discharge is because of my car, which I lovingly refer to as Sophie. I owned a 2006 Volkswagen Jetta, which was purchased from a VW dealer as a used car – it was previously a leased vehicle with 1 owner. Almost immediately after purchasing the car, I began to experience tons of problems. Luckily, I was covered under the original warranty for a bit and then covered under my extended warranty for about 20,000 miles over the expired original warranty.

Sophie has had her share of issues – malfunctioning air bag (x3), malfunctioning trunk lock, malfunctioning car door locks, bald tires (when it was sold to me, the tires were bald!), rumbling in the engine (I call them my “squirrels”), an emissions issue (even though it passed it’s emissions test), and a handful of other issues. Needless to say, that not only was my patience worn thin with monthly visits to the dealership to have my vehicle serviced, but it also started to get expensive with quotes from $800-$1,200 to fix it after the warranties expired. I did not want to keep shelling out money for this car, so I started to investigate and research what I needed to do to get my hands on a brand new, more reliable vehicle.

Sure, the thought of taking on a larger car payment, more debt (I was down to a balance of $6,500 on my VW) and the worry of having a beautiful new car freaked me out a bit since I went through the bankruptcy and foreclosure in the past year. You don’t realize how much you’re hit emotionally when you go through something like that – and I’m pretty good at hiding how it really made me feel. Right now, it’s just a whole lot of avoidance.

So, after researching vehicles, JP and I started test driving in June/July this past year. We went to Honda first because I had my eye on a CRV, and we test drove that vehicle and an Accord. Immediately after that test drive, we realized that we wanted a small SUV and not a car, so we scratched cars off of our wishlist. We then went to Hyundai to test drive a Tucson, which had a ton of neat features in it’s basic model and a great warranty (10 years/100,000 miles), but thought the vehicle was small compared to the CRV and wasn’t a brand that was as reliable as Honda. After our Hyundai test drive, we hopped on over to Kia where we had a terrible experience. We walked in to the showroom, which was really busy, and two salespeople just looked at us. I had to ask if they worked there because no one was apparently making the move to help us.

We got paired up with a brand new salesman who was ending the first week on the job. He knew NOTHING about the vehicle and sat in the back seat of our test drive, super quiet, the entire time. It was so weird and awkward that as soon as we realized the vehicle wasn’t for us – we ran out of the showroom and hit the road in the Jetta.

We decided to cool our jets for a few months, especially since my dog (a 14 lb min pin) digested some fudge in August and was rushed to the animal ER, which that visit cost me over $900. Yikes! The biggest (and most obvious) problem of trying to make any purchase after a foreclosure or bankruptcy is that your credit score and history take such a big hit that it takes a long time to work on building that back up. And even if you manage to get your score back up to a normal amount, banks and other financial institutions will likely flee from you in horror because of the big financial mistake you have on your history for the next 10 years. You’re a risk and they know it.

The way I was able to secure a big car loan isn’t conventional, so I really can’t even give you great advice on that. I worked with a credit union that I had done business with in the past (and that I had declared bankruptcy against) to pay back the amount I had discharged. Even then though, you’re not guaranteed to get a credit union to work with you but I do think you have better luck with them than a large bank. I was able to not only get a loan but get a loan with a reasonable APR (no 20% + for me!), which is amazing because I really needed to get a new car. We ended up getting a 2013 Honda CRV EXL model, which is great because we weren’t expecting to get a 2013! We also have a Costco discount, and that took some haggling pressure off of us (especially since we’ve heard that Honda doesn’t work with customers). We had a great experience and are in love with our new car!

This is Vivian … ain’t she purty?

If you can wait, some credit unions (and possibly banks) will work with you about 2 years out from your bankruptcy discharge. Just remember to keep building your credit, and stay wary of credit card offers that are too good to be true. I’ve struggled with “when is the right time to get a credit card,” which many credit unions and banks will tell you is needed to rebuild your credit history before they will work with you. Just be careful with that, especially if that’s what got you into trouble in the first place!

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Buying a New Car After Bankruptcy (and Foreclosure) – Part 1

This is not a sponsored post. All information and data is from my opinion and experience.

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I filed for bankruptcy last year and was officially discharged in October 2011. It was a heartbreaking decision but was something that I needed to do to protect myself from an unwanted foreclosure. Doing a lot of research on the repercussions of the bankruptcy and foreclosure on my credit, I knew I was in for some pain points in my life in terms of getting new credit, loans, etc. for years to come. Even applying for a new apartment application hurts the pit of my stomach as I wait to be rejected due to my credit history.

What I think is the most frustrating is that I have great employment history, being at my company for over 11 years, I make a decent amount of money and now have limited debt (just my car and student loans) so I have a great debt to credit ratio. You’d think with all that positivity, that my chances of being granted some form of loan or credit would be good, but when you have a bankruptcy in your recent history, that’s just not the case. The good news is that I no longer have credit card debt or unsecured loans. I live on the cash I receive from my paychecks and am able to put a good amount of that in savings every month.

The bad news is that I kind of need a new car. (I’ll explain “kind of” in a little bit.) And because of that, I’m unable to qualify for a loan for at least another 14 months. Just to try and start the process, I contacted a local credit union that was running an awesome APR rate for new car loans…just to see what they would say. After running my credit (and I even slapped JP on the application, hoping that would help) an answer of “No” came 3 business days later…mostly due to the bankruptcy on my credit history. My credit score rose a bit from my October 2011 discharge from 597 to 623 so that shows some good progress, but even the credit union said I would need to be two years out from the discharge and prove that I established new and positive credit history. The only way to do that right now is to pay a lending institution to give me a credit card. Check out Option #4 here. It’s called a secured credit card where you give the lending institution your money (essentially proof that you will be able to pay back debt because it’s a form of a deposit), and then can build your credit from there. Downfall is that you have to front your own money before being able to use “theirs”.

Here’s another article on the “best” cards out there to rebuild your credit. And by “best” we’re talking high interest rates, high annual fees and some of your own money up-front. The good news is that they will report your spending habits so if you stay on top of your credit card, your positive spending history will get reported to help boost your credit score and show other lenders that you’ve changed your spending ways which could help you qualify for a loan in the future, especially if you’re looking to get a home loan. The best home loans for those that have went through bankruptcy or foreclosure are FHA loans which can help people with low income or terrible credit get a home loan within 2-3 years of their bankruptcy or foreclosure, with a minimum down payment.

So that’s the jist of what I’ve been dealing with … the next part will be the Pro-Con-Pro of buying a new car and keeping the old, followed by “Was I able to get a new car?” and the outcome of everything! Stay tuned!!

Sallie Mae is under 40K!

Does anyone else have ridiculously high student loan debt? I do. I went to a private 4-year university, hoping to play softball, and ended up quitting the team my junior year. That’s a whole ‘nother story. But I loved the school and I grabbed a Bachelor’s degree in English (which I’m thankful everyday for my great job in HR to help pay the bills). I had over $46,000 in student loan debt (in actually may have been closer to $48,000) and cringe every time I make a $400 payment per month. Ouch.

Well, with my last payment, I am now officially under $40,000! Oh yeah, I’m at $39,829.77! What, What! I thought I’d never see the day! Now my eye is on that under 30K mark! I have a long ways to go!


Closer to a car decision

Awhile back I talked about the problems with my VW Jetta (ahm – you shouldn’t ever buy a VW. ever.) and was weighing options between leasing and buying a new car. I’m still going back and forth but am leaning more towards maybe buying something that I love and can have for a very long time. Then there’s the cost factor. Why are all the vehicles that I really like over $20,000? And why did my bankruptcy give me such terrible credit (hides head in shame) that I’m faced with a possible 8% APR or higher? I may be forced to lease.

Through work, I get a really good deal on Chevy’s. Not that I’m a Chevy gal. But hey! It’s better than NO discount at Honda or Toyota. (We’re talking like $5,000 off of the MSRP discount). Yeah. Balla! So, I’m stressed out and excited about this. Excited because I get to trade in Sophie and get some NEW and nicer. Stressed because of all the money stuff related to this. We’re shooting for fall for this all to go down. So I have lots of time to wait and worry 🙂