Obtaining a loan after repossession of a car, home, or other major asset is not the easiest task. In many cases, the ability to secure a loan immediately after the repossession takes place is not possible. Fortunately, there are a few strategies that allow you to begin rebuilding your damaged credit rating and improve the chances of qualifying for a personal loan or even a home loan after repossession has occurred.
If at all possible, find a way to pay off the balance of the outstanding loan. For example, if your car is repossessed and sold to partially settle the debt, make it a point to make up the difference. Keep in mind that there may also be storage fees and other costs incurred by the lender that must also be settled. Doing so will prevent further damage to your credit rating and increase your chances of securing a loan after repossession takes place.
Look closely at your remaining debt load. Many lenders will look closely at the relationship between your total indebtedness and your income. Simply put, the more disposable income you have, the less of a risk you present to a prospective lender. Take a few months before applying for a loan after repossession occurs and concentrate on paying off or at least paying down as many debts as possible.
Even with efforts to settle with the lender who executed the repossession and paying down other debt obligations, don’t expect to obtain the best interest rates on a loan after repossession takes place. While some lenders will be willing to work with you, most will have some concern about the events leading up to the repossession. Be prepared to frankly discuss what circumstances led to the repossession and how those events are not likely to occur again. This, along with your efforts to reduce debts since the repossession, may be enough to justify the extension of a high-risk loan with higher interest rates.
Depending on the exact nature of your circumstances, obtaining professional financial advice, especially loan advice, may be a good idea. A financial planner can help assess the damage to your credit, evaluate your overall situation, and provide specific tasks to complete before attempting to get a loan after repossession. While the task is not easy, it is possible to overcome the effects of the repossession and get your finances and your credit rating back on track.