For those individuals with a bankruptcy on their credit histories that are looking into getting a bankruptcy auto loan to help rebuild their credit should consider getting GAP (Guaranteed Asset Protection) protection. Buying GAP insurance for your vehicle could save you thousands should you ever get in an accident.
What is GAP Protection Insurance?
Most insurance companies will cover enough to pay for repairs or a replacement parts if your car is damaged, but if you happen to get in an accident and total the vehicle they will only pay the cash value of the car. Therefore, if your loan balance is greater than the car’s value you will be responsible for covering that “gap”.
GAP protection will cover that amount, and although it’s often called insurance it is actually a debt cancellation agreement. There are many ways that a “gap” between your bankruptcy car loan’s balance and the value of the car.
How Bk Car Loans Develop a “Gap”
Depreciation is the number one factor, but there is also loan terms, no down payments, and a few others. New cars can depreciate up to 30% the second they are drove off the dealer lot and considered “used”. Some cars depreciate faster and therefore you become upside-down on the loan quicker.
Financing a car with bankruptcy on your credit report can hurt your loan terms. You may only be able to get a loan for an extended amount of time, which is another way you can become upside quicker. Also, with subprime credit many lenders will require a down payment. If you don’t have one your payments will be higher and you could end up upside-down on the loan in no time.
Find a Subprime Finance Company Offering GAP
You can usually purchase GAP coverage from your insurance company if it is not offered to you through the finance company. If you do it this way it is often a monthly fee added to your insurance premium. Many times subprime lenders accepting bk clients will offer the protection tacked onto your loan. This is usually a lump sum owed at the time of financing.
If you haven’t purchased a vehicle after bankruptcy yet, we can help you. We have a network of nationwide subprime lenders that work with all bankruptcy situations; discharged or open. With the tools and experience they possess they can give you your best chance at an approval, and you could be on your way home in your new car in just a few days.
Remember, we are not lawyers and cannot give legal advice. The situations discussed are only our experiences over the years and may vary with each customer.