You might think that another financial obligation is the last thing a student would want to take on.
But sometimes, it’s necessary.
For example, most college students need reliable transportation to get to school, an internship or a job, and that might require taking out a car loan to ensure transportation is available.
Even with no credit history, tuition costs and educational expenses to contend with, car loans for college students may be easier to get than you think. Everyone needs to start somewhere, and for many young drivers and first-time car buyers, it’s with the help of financing.
A student can take a number of steps to ensure such a car loan doesn’t become a burden.
How to approach car loans for students
- Work on building credit – “There are no secrets to building a strong credit score,” says the Consumer Financial Protection Bureau (CFPB), but it lists these guidelines that might help:
- Pay your bills on time, every time
- Don’t get close to your credit limit
- A long credit history will help your score
- Only apply for credit that you need
If you’re looking to get your credit history started, taking out a secured credit card or store card, cosigning with a family member on a card, or becoming an authorized user on their credit card account are all approaches recommended by the CFPB.
- Budget and don’t take on too much car or too large of a loan – Auto finance calculators will help you estimate what you can afford, not just as a monthly car payment, but for the total cost of the loan, too. When choosing your vehicle, consider checking out lists of top cars for students put together by experts at the likes of Edmunds, Kelley Blue Book and Autotrader. Often, these include safe, good-value used cars.
- Get a cosigner with a good credit rating – A cosigner is obliged to pay back the loan if you fail to, and a lender will take into account the credit history of the cosigner, as well as the main applicant, when making a decision on a car loan application. When credit history is limited, getting a cosigner, like a parent, family member of friend, with good credit may improve your chances of securing financing, says the CFPB.
- Make a down payment– It could be cash down, a trade-in or both. Whichever way it’s achieved, the more that’s put down, the less you need to borrow. A larger down payment may also reduce an approved applicant’s monthly payment and total financing cost, the bureau points out.
- Apply to several auto finance lenders – Consider online companies such as RoadLoans, which accepts applications for car loans for students. RoadLoans accepts auto loan applications from consumers with all types of credit – including those with no credit and bad credit.* Qualified applicants can get preapproved and shop for a vehicle already knowing the loan amount and terms for which they are approved. That means they can concentrate on negotiating a good price for their car when it’s time to buy.
- Negotiate the terms – Negotiating the terms of your loan, like the annual percentage rate and interest rate, may save you a decent amount of money over the life of the loan. Other negotiable terms might include the length of the loan, whether there are prepayment penalties, and any additional fees.
- Keep payments up to date – Remember, “pay your bills on time, every time,” is top of the list within the CFPB’s advice for building a good credit score.
It’s easy to see car loans for students as problematic, but students who qualify for financing are able to purchase the vehicle they need now, and enjoy the convenience and independence of their own set of wheels through their college days.
Apply for a car loan and get an instant decision.
* “Bad” or “Poor” credit generally is considered a FICO score around 600 and below by sources including the Consumer Federation of America and National Credit Reporting Association (reported by the Associated Press), Bankrate.com, Credit.com, Investopedia, NerdWallet.com and others. The Congressional Budget Office identifies a FICO score of 620 as the “cutoff” for prime loans. FICO scores are not the sole factor in lending decisions by RoadLoans.com and Santander Consumer USA.