Having your car repossessed is never a pleasant situation. But unfortunately it can happen to the best of us, and afterwards you might be left completely without transport. This means that you will likely have to look into another car loan in order to purchase a new car.
You might be thinking that this is impossible after having your car repossessed, but with a little preparation, you will be able to buy a second car. Car repayments in South Africa are based on affordability and credit history. So if you are in need of a new car after your car is repossessed, read on below for some advice on how to get a car after this difficult time.
Understand how it affects your credit
A car repossession can have an impact on your credit rating, but this does not make it impossible for you to apply for car finance online after the fact. All information will remain on your credit report for up to seven years and you can expect a drop in your credit score of between 60 and 200 points.
The drop in points will depend on your current credit score and will affect your risk level when you apply for a car finance online or in the bank. The higher your score, the closer to 200 points you will lose. This is because a large adjustment is required to show your new risk level to banks who will be calculating your car repayments. However, your credit score will recover over time as you take proactive steps to reduce your debt and ensure that all repayments are made on time.
Pay all balances and fees
Once your car has been repossessed, it will likely be sold. And once this happens, you will be responsible for any difference between the loan balance and the amount the car sold for, including any repossession fees.
If there is any money that is owed after the sale, you will need to be sure to pay it as soon as possible. Keeping this debt outstanding might have a negative impact on your credit score and trustworthiness with the bank. It will also ensure that you can look for a new car with a clean slate, which will increase your likelihood of receiving another car loan. Car repayments for those with lower credit ratings might be higher, but after paying all balances, this could change in your favour.
Check your credit score
Once you have made all balance and fee payments, you should move on to checking your credit score. This will allow you to see how many points have come off and to check for any discrepancies before you apply for car finance online.
You are able to check this from three major credit bureaus to get the most accurate report. When you receive this report, you will need to ensure that all of your information is accurate and be sure to dispute any inaccuracies with them as soon as you see any. Ensuring your information is correct will make it easier for you to apply for a new car loan as there will be no issues that crop up later.
Apply with a co-signer
If you cannot wait for a year to re-apply for car finance, you can look into applying with a cosigner. This means that they will be responsible for repaying your loan should you not be able to due to financial constraints.
It is an agreement that should be taken seriously because the co-signer will be taking on your debt as well. Applying with a co-signer will make you seem less of a risk in the eyes of the lender and you will be able to secure a loan to help you pay for your new car. Just be sure that whoever you choose as a co-signer is trustworthy and able to make repayments if you are no longer able to.
Wait for a year
If you can, it is a good idea to wait for a year before applying for car finance after a repossession. This allows time for your credit score to increase a bit and you can work on repaying other debts to help this along. You will also be able to save some money for a down payment for your new car. Within a year, there might be auction cars in Midrand you like and can afford, too.
By waiting for a year, you will also be able to deal with the stress of losing your vehicle. You will be able to react calmly and without saying or doing something you might regret. You will be able to plan a budget and lenders will be more likely to consider your loan application once a year has passed. You might have to apply with a co-signer regardless of if a year has passed, but be sure to assess your financial situation before making any decisions.