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Another aspect of bankruptcy and credit: car financing

One of our themes in this blog is that it is very possible for most people to rebuild credit after bankruptcy.

That is why we began the week by discussing how bankruptcy can be a building block toward a financial fresh start. As we noted in our February 24 post, this can even mean improved prospects on the dating scene if a would-be romantic partner asks about your credit score.

But it does take time to repair your credit. In this post, we will discuss the question of how to approach buying a car when you still have bad credit.

Prospective car buyers with compromised credit should be wary of car dealers that might try to take undue advantage of someone’s difficulties with obtaining financing. They may feel they have leverage on you because you do not have sterling credit to support some of the available financing options.

Of course, it can be difficult to keep this caution fully in mind when you are on the car lot looking at vehicles you’d like to drive away.

Don’t give in, though, to the temptation presented by a dealer’s invitation to just drive a car away with financing terms that are not fully finalized. What can happen in those situations is that the dealership may try to impose a significantly higher interest rate than you were counting on.

Similarly, you should be cautious of attempts by dealerships who ask you to get people to co-sign for you on a car loan. To be sure, sometimes having a co-signer is appropriate, such as for car buyers who are still in school. But other times car dealers may try to word the finance contract in a way that imposes excessive obligations on the co-signer.

Source: Consumer Affairs, "Buying a Car with Bad Credit - What NOT to Do," Accessed Feb. 28 2014

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