It is possible to get a car loan after a short sale, but many aspects of the loan will be dictated by whether you have a deficiency balance that you are liable for or not. A deficiency balance, as you may know, is the difference between what your home/property sells for and what you still owe the bank or lender. These are sometimes forgiven by the lender, and sometimes they aren’t.
Do You Still Owe Your Mortgage Lender?
Lenders are already going to look at the short sale on your credit report as a negative, but if you still owe a deficiency, you may face wage garnishment, which is even worse. Garnished wages severly impact your ability to repay the new loan, effectively narrowing your debt-to-income ration and making you a higher credit risk. Lenders will want to see that you have been on-time with all of your payments since the short sale.
Down Payment and Annual Percentage Rate
You are going to need a higher down payment than you may be used to. Some lenders may require as much as 30 percent down after a short sale. Another issue is going to be the interest rate that you have to pay. The short sale will probably add 2-5 percentage points to your new loan, perhaps more. APR rates in excess of 15-18% are not unheard of for consumers with a recent short sale on their credit report. Given this high rate of interest, it is important to keep your monthly payment as low as possible. Ten percent of your monthly income should be your maximum, and 5-8% is a healthier number.
Applying for Car Loans with a Short Sale on Your Credit
Traditional banks will most likely deny your loan, but credit unions and online lenders are more forgiving. There are plenty of specialty lenders who are going to be willing to help you so long as you had a good credit history prior to the short sale and a habit of on-time payments afterward. If you would like to see if we can place your application with one of these lenders in our network, simply apply online. The process is straightforward, relatively fast, and there is no obligation or fee for applying. You will need a monthly income of $1500, and a debt-to-income ratio of less than 50% is preferred.