The average Canadian has $26,000 in student loan debt. This debt is quite substantial when trying to buy a new car. We are going to give you some advice on how to get a new car loan with student debt
How much debt are you carrying?
It is considered bad manners to talk about money, but we are going to help you. Aside from your student debt, how much do you owe on your other obligations? Car lenders will not approve a loan if your debt-to-income is more than forty percent.
When you are carrying too much debt, there is a risk of getting yourself overextended. If you are carrying too much consumer debt, try to pay it down so you have more room in your budget that can be allocated towards a car payment.
Do you have a car to trade-in?
If you have a car to trade in, it will reduce the total amount of money that needs to be financed. Even if the car is old and has seen better days, dealerships will give you a competitive offer.
What is your credit score?
Having too much debt is not an ideal situation, but if your credit score is high, you will be able to qualify for a lower interest rate. You will need to make your payments on time to have a high credit score. Free apps like Credit Karma will let you review your credit score. Did we mention it was free?
Assessing your sources of income
How much money are you earning, and how are you earning it? You need to show prospective lenders how you intend to repay the loan. The pandemic has caused a tremendous amount of income instability. Lenders are cautious and will ask you for documentation that proves how much money you make.
Self-employed borrowers go through the most extensive documentation verification. It can seem like a hassle, but it is necessary, or the lenders could issue a bad loan.
Are you buying from a dealership or a private seller? While you may be able to find some bargains by going through a private seller, your best option is to work with a dealership.
The dealership is able to get you approved for loans that you cannot find on your own. There are risks associated with buying from a private seller. When you buy from a dealership, you are protected by the full force of the law.
Select a car that is within your budget but don’t worry. You will be able to buy a newer car in a year or two once your debts are paid down.
The dealership will prepare a plan that lets you refinance your current car loan to something lower in a few years. You can buy a new car loan with student debt, but should find something soon. You could be priced out of the market and forced to buy an older used car with prices on the rise.
For those of you who know that you have a challenging credit situation, please visit Dixie Auto Loans where we have a team of credit specialists ready to help you get approved for a car loan today!
For any questions or concerns, please don’t hesitate to contact us here!