Financing a Car Loan After Repossession

Securing a car loan after repossession can be an uphill battle for many. Following your repossession, dealers and lenders may be more hesitant to sell you a vehicle, and it will take time to rebuild your trust with the system. Our team at Granite Hyundai is ready to learn more about your situation. With a credit restoration program and industry experts on-site, we are here to discuss your potential options. In today's post, our team wants to break down how a car loan after repossession works and who might be a good candidate for our restoration program. Stay tuned, and let's dive into it.

Understanding Car Loan Financing After Repossession

A car loan after repossession takes time, patience, and trust-building with creditors and lenders. Normally, someone who recently experienced a repossession will be unable to finance a vehicle but can pay in full without much difficulty. Financing a car, truck, or SUV means you have a loan and a lender, and a repossession can create friction between the two. However, Granite Hyundai is here to walk you through the post-repo steps to finance a car, so there is hope for you.

How Hard Is It to Finance a Car After a Repo?

Because a car repossession stays on your credit report for up to 7 years and often drops your score by 100 points or more, securing financing can be very challenging. That said, you can start rebuilding your credit as soon as the repossession happens, with most people's timelines being around 12+ months before submitting any type of auto loan paperwork. This will be a long process of recovering your credit, but it is possible.

What Happens To a Loan After Repossession?

After a car repossession, the lender sells the vehicle (usually at auction) to recoup losses, and you're typically responsible for the deficiency balance (what's left on the loan plus fees minus the sale price). You are still likely on the hook for repayment, but the vehicle will no longer be yours. Repossession is the final resort lenders usually resort to when trying to recover payments from a borrower.

Financing Options Available After Repossession

The good news is that a car loan after repossession is possible to secure, just expect higher interest and origination fees. You will be in a lower credit tier following a car repo, so your loan options will be sparse, and the rates will be surprising. Below, let's check out what financing options are normally available to drivers with a repossession history.

Subprime Auto Loans Through Dealerships

Dealerships sometimes offer subprime (low-credit) financing to people with poor credit histories or negative items on their credit reports, such as a repossession. These will vary by dealerships, mostly because each one can decide its own terms for financing and how to put those into action. It never hurts to ask, and Granite Hyundai is here to help you get a loan for your future vehicle.

Manufacturer and Dealer Special Financing Programs

In some cases, manufacturers can run specials on financing programs, sometimes overlooking a car repossession or taking lower credit scores into account. You might end up with less interest during these promotions, but it is at the dealership's discretion. If the repossession is recent, do not expect any deal to apply to your financing options or offering.

Buy Here Pay Here Financing Considerations

If you run into a 'Buy Here, Pay Here' financing opportunity, these do often come with high fees and more conditions being mandatory for the borrower with low credit and a repossession on their credit report. (BHPH) Financing means the dealership itself is the lender. We urge drivers to be cautious of these types of loans, as they can actually damage credit in some instances.

Using a Co-Signer to Improve Approval Odds

Much like someone applying for a loan who just has bad credit, someone with a repossession to their name can try and use a co-signer to lessen potential interest and raise approval odds. A co-signer should be someone with high credit (700+) who has never had any derogatory marks, such as a bankruptcy or a repossession. They help bring up your average when a lender is reviewing your application.

How a Hyundai Dealership Approaches Post-Repossession Financing

A Hyundai dealership can approach a car loan after repossession in a couple of different ways. Depending on the dealership, there might be a credit rebuilding program and better incentives for people currently rebuilding their credit, including at our location here in Somersworth, NH.

In-House Financing and Lender Networks

In-house financing for car loans after repossession and subprime lenders in their networks are two of the most common ways to get a new car through Hyundai. When Hyundai lends you a car and essentially the money to buy the vehicle, they may be more willing to do this for a long-time customer of the brand or a specific dealership location.

Credit Review and Income Verification Process

Even with a repossession, your credit and income can make a positive impact on whether a Hyundai dealership ends up offering you a loan. As we shared before, a repossession stays on your credit report for seven years. However, that doesn't mean you have to wait seven years to secure a loan for another car, truck, or SUV. Great income, long-time employment, and rebounding credit can get you a decent loan term through a Hyundai dealer directly.

Matching Vehicle Selection to Approval Criteria

Something that might also help you get a car financed through a Hyundai dealership is choosing a car that fits your budget and current financial situation. Some people want the most expensive model and trim but have a repossession on their record, often resulting in financing denial, which we want to help prevent. Stick with something in your budget, make on-time payments, and ask a sales team member about your financing options during the application process.

Steps to Improve Approval Chances

If you are looking for steps to improve your chances of approval for a car loan after repossession, always try to appear as financially stable as possible. When a dealer or lender reviews your application, the more "normal" you can seem, the better. This might include maintaining long-term employment, making a large down payment, paying down other debt, or simply waiting until your credit repairs itself after the initial repossession.

Demonstrating Stable Income and Residency

Living and working at the same place for more than a year always looks good to lenders. Most times, employment history is more substantial than residential history, but if you can stay somewhere for 2-3 years (or even 5+), this helps soften the blow of the repossession on your credit. Again, more stability means a greater chance of approval for post-repo financing.

Saving for a Down Payment

If you are worried about your repossession delaying the car-buying process, we recommend considering saving for a down payment to prove your financial literacy to the dealer/lender. This is a universal step to securing lower monthly payments, whether you have good or bad credit, so saving now can pay off later.

Reducing Existing Debt Obligations

Lower debt is always better when financing a car, truck, or SUV. Much of the time, paying off credit cards, loans, and other obligations before applying for a car loan can help boost your credit score right before the big day when you send your application off to the lender. There is "better" debt (<30% of your income), and then there is negative debt that impacts your chances at any type of financing (more than 30%). Aim for less credit utilization if possible.

Choosing the Right Hyundai Model for Easier Approval

Selecting a Hyundai that meets your needs on the road and each month when it's time to pay your loan balance is a good start in the loan process. Hyundai makes plenty of affordable vehicles, like the Kona and Venue, and our team at Granite Hyundai is happy to get the ball rolling right here in Somersworth, NH. Choose something that is fun to drive but also comfortable for you to finance for the next few years.

Loan Terms, Interest Rates, and Expectations

Always expect loan terms, interest, and general conditions to be more challenging if you have a repossession. Our team at Granite Hyundai always sets you up for success, and as part of this process, we lay out honest terms and expectations for your future vehicle loan. A repossession will put you in a high-risk category for any lender out there, including in the auto industry. Keep that in mind, and try rebuilding your credit before making any big decisions.

Use Granite Hyundai's Credit Restoration Program

Here at Granite Hyundai in Somersworth, NH, we offer a credit restoration program that makes getting a car loan after repossession more possible for our drivers. You can get started by coming into our dealership and getting started with one of our loan experts, and we can help double-check your credit report. Don't feel like there are no options or avenues for you to take, Granite Hyundai is here to lend a hand.