When you purchase a car with a post-bankruptcy auto loan you may wonder if you need gap insurance. Although gap insurance is never a requirement for a high risk auto loan, sometimes it makes sense. Determining whether or not you need it is relatively simple.
What is Gap Insurance?
Gap insurance is used to pay the difference between the current cash value of the vehicle and the amount owed (possibly minus a deductible) if you are in an accident that is a total loss. Depending on how far along you are in the loan, you may end up owing thousands of dollars after the insurance payoff. You will still be responsible for paying off this amount, even though the vehicle is gone.
For high risk buyers who purchase a used car after bankruptcy, this can be a huge problem. You may find that you aren't able to pay off this amount and afford the payments on a new loan. Even rolling over the previous balance into the new loan may cause hardship.
This is why purchasing gap insurance may be a good idea if your car loan meets at least one of the following criteria:
- You put less than 20% down on it.
- The loan longer than 48 months.
- You put more than 15,000 miles per year on the car.
By purchasing gap insurance you should be able to avoid paying a ton of money to the lender if your car is written off as a total loss after a crash. In many cases, you can purchase the gap insurance through lenders who work with bankruptcy. You may also be able to purchase it through your car insurance company.
Getting Car Financing after Bankruptcy
Getting car financing after bankruptcy discharge is easy through BankruptcyAutoFinancing.com. We have a network of lenders who can get you into a car, truck or SUV quickly and easily. To get started, simply fill out our online application and one of our auto loan experts will contact you with your options.
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.