If you’re off to college, having a car is part of the journey. If you don’t have the cash to buy one outright, you may have to consider an auto loan. That’s what we’re discussing today. Our auto loan team outlines options for those financing a car loan as a student.
Here’s what students need to know about auto loans.
Save For The Down Payment
Down payments serve a couple of purposes. They reduce the amount you have to borrow and make lenders happy. Saving as much as you can takes time but can mean the difference between affording a specific car or qualifying for a car loan as a student, or not.
Auto loan companies like down payments as they show commitment. They much prefer borrowers who have their own money at stake as they are less likely to default. This can make the difference between being accepted and not.
Get a Job
To qualify for a car loan as a student, you’ll need a source of income to pay for it. For the lucky few, that could mean an income from parents or other source.
For the majority of us, it means getting a job. Working is part of many college students’ lives so isn’t a big deal but may mean not having so much time for study or for enjoying the college experience.
The fact is, if you don’t have sufficient income to make the monthly payments, you’re not going to qualify for the loan.
Build Your Credit Score
As a young person, you won’t have a high credit score as you won’t have been able to access credit. That needs to change.
While you can access an auto loan with low credit, you get much better rates with good credit. Use a credit card, use a cell contract that reports your payments and make sure to always pay everything on time.
Do whatever you can to build credit that doesn’t cost you money.
Use a Co-signer or Co-Borrower
If you need a car loan as a student in a hurry, you can use a cosigner to guarantee the loan or a co-borrower to come in on it with you.
A cosigner guarantees your loan but doesn’t own the car. They commit to repaying the loan if you default for any reason.
A co-borrower is in on the loan with you and part owns the car. It turns your auto loan into a joint loan which gives them legal title to the vehicle as well as responsibility for servicing the loan.
Either can help someone with low credit qualify for an auto loan as long as you know someone with good credit willing to work with you.
Set Your Budget
We always recommend setting a budget before you start looking for cars. Ever heard the term ‘champagne taste on lemonade money’? That’s very true with cars.
Most of us have a tendency to want cars that are out of our budget. Having that budget already in mind before you go shopping should stop you falling in love with something you cannot afford. We say should…
Your budget should include your down payment or trade in and the amount you could borrow to come up with a usable figure. Use an auto loan calculator to do the rest.
Pre-approval For a Car Loan as a Student
It’s a dry run to see if you could qualify without having to apply for a loan. If you don’t qualify for the amount you want to borrow, lower the loan amount or increase your down payment, whichever you’re most comfortable doing.
Find a Good Cheap Car
Try not to be tempted to buy something expensive while you’re in college. If you’re a new driver, you will ding the car and while you’re on campus or living in student neighbourhoods, crime can often be an issue.
You wouldn’t want any of that to impact your car. We recommend buying a good quality, ordinary car to attract fewer thieves while offering a comfortable, reliable drive!
If you’re ready for a car loan, we’d love to help! simply click here to get pre-approved online today.