The debt settlement process can be difficult to work through on your own, especially if you have never negotiated with creditors before. Because of this, many people choose to go through debt settlement with a company that can help them through every part of the process. It’s very common for people to have a lot of questions about what will happen afterwards, however. One of the first things that many people ask is what they will be able to buy after going through debt settlement. Specifically, many people are concerned with whether or not they will be able to buy a car.
Before answering his question, it is important to understand how debt settlement works. Throughout the process of debt settlement you will work with a professional debt negotiator. This person will work with you to review your outstanding debts, then he or she works with you to negotiate a settlement of this debt with your creditors. On your behalf, this person can work to get you a lower interest rate or a reduction in your loan fees. The majority of the time, however, this person will work to get the principal balance of the loan reduced. Not only will this reduce the total amount you have to pay back, but it is often possible to get a reduction in your monthly payment as well.
One of the biggest downsides to debt settlement, however, is that it can have a negative effect on your credit score. Typically, each debt that is settled with a creditor will be annotated on your credit report. In most cases, the amount that is deducted from your principal balance will show up on your report as a write-down or charge-off by the creditor. Unfortunately, it is not uncommon to see a big drop in a credit score drop after going through a debt settlement.
Usually, this sharp drop in your credit score can affect your ability to get financing for a car. Because so many banks are tightening their rules on car loans, it can be very difficult to find a car loan without a great credit score. Many people who are not expecting their credit score to drop have become frustrated when they go to buy a car and cannot get financing.
Fortunately, there are a couple of different ways to get around this issue. To start, many consumers have discovered that a lender is more willing to consider them for a loan if they have a down payment of at least ten percent of the total selling price of the car. Even without cash saved up, many times lenders are willing to consider the trade-in value of your old car when writing up the loan paperwork.
In other cases, the bank is willing to offer a loan as long as you are willing to pay a higher interest rate or find a cosigner. While both of these can pose some hardship, it is a way to get financing in the event that you have to buy a car.
Most people, however, wait for this negative information to expire or fall off of their credit report. Depending on the exact circumstances, this may take between two and four years. A lot of people use this delay to rebuild their savings and rebuild their budget.