Most people turn to car loans to finance the auto purchase. But is that option even available for young folks like you? Can you still get a car loan if you are a student? What about the credit history that you didn’t have the opportunity to build yet?
Well, here’s the good news: you can finance your car with an auto loan as a student. And you can do that completely independently, without asking for any financial help from your parents.
It is important to understand that you need to consider various factors before getting a car loan. For a student, this may not be the easiest process. Don’t be tempted if a fellow student just got his or her car through your loan. It may not be as easy for you since your circumstances will be different.
Factors like credit history and no income can play a major role. For a student, having a fluctuating income with no credit is a common scenario. But before you lose hope, here are the top five tips you can follow to secure a car loan and get yourself your ride right now!
Top 5 tips to get the best student car loan
Don’t have enough cash to buy a car right away? Don’t worry; you are not alone. Most students find themselves in a similar situation when they are buying their first car or getting a new one. Ideas like, ‘I may scrap my car for cash, ‘apply for a better job,’ ‘build a credit history first,’ and similar thoughts may come into your head. But before you pay attention to them, learn about your options.
These five tips are inevitably going to help you:
- You must have the down payment
As difficult as it may sound, you need to develop the discipline in your life that enables you to save up a pile of cash for down payment. This calls for strong financial decisions that you should prepare yourself with. Just envying the rides of your friends may not help. You need to set up the right financial goals and follow them.
If you need this car, you must have cash saved up for the down payment. You must also choose your car very carefully as the down payment is usually 5% to 10% of the total vehicle’s value. If you choose an expensive, fancy car, your down payment will be hefty too.
If you can save more money than required, you can successfully use that to get a concession on the monthly payment towards your vehicle and can even lower the interest rates.
Lenders are particularly in favor of students who have the cash ready for the down payment.
- Arrange for a steady income
To be able to finance your first car independently, you must have a steady income. It is the surety you give your lenders that you can easily afford the monthly payments on the car. This is where most students suffer. Of course, it isn’t easy for college students to manage a steady income at this age.
However, it is an important aspect to get a car loan on favorable terms. But, you have other options too.
- Manage a co-signer
This is one of your options if you do not have a steady income. This can, in fact, make securing the best car loan quite easy for a student. All you need to do is find a co-signer – ideally, someone with a steady income and good credit history – willing to provide a guarantee on your behalf for regular and timely payments.
A co-signer is also the one held responsible in case you fall short of paying your loan on time. You can ask a friend or family member to become your co-signer and vouch for you. This could increase your likelihood of getting a car loan at favorable interest rates.
- Consider refinancing plans
Look for refinancing deals. For students, this could be an ideal situation as it helps build up both funds and credit. In future, it can also help you negotiate for better interest rates and favorable terms when you are ready to invest in your second car.
However, it is important that you choose the right bank or dealership for your first student car loan to ensure you have the refinancing option. It will further help you improve your credit rating and will improve your position as an individual to get better loan deals in the future.
- Shop carefully
Always remember that you have multiple options when it comes to getting a car loan. You must consider all your options before making your final decision. Shop around and check banks, credit unions, dealerships, and even online lenders for the best deal.
If you already have a bank or credit lender that you are associated with, it is best to check with them first. Since you already are their customer, they might offer you a car loan without a lot of conditions.
Most credit unions offer lower interest rates as compared to the banks. For students on a tight budget, this can be a good deal. However, don’t settle in until you have explored all your options. Even online lenders can offer you a low rate due to high competition in the market.
Compare the options with your situation to see which one works best for you.
Don’t forget your car insurance, especially when you are ready to sign for your car loan. You are likely to opt for the full-coverage car insurance, as it is the most feasible one for a vehicle with a loan.
Also, be aware of your financial circumstances before opting for a car loan. Start with an economy car model, which is ideal as far as your expenses are concerned. It will keep fuel cost and new part costs at a minimum.
If you follow these tips, you will soon be driving your new set of wheels to your college!