HOW TO GET APPROVED FOR A STUDENT AUTO LOAN
Are you a student who needs a ride to and from school?
Even if you don’t have income and credit, you can have your own car through a student auto loan.
There are a lot of lenders these days that offer auto loans to students. You are considered a high-risk borrower, though, because you lack credit history and income.
But lenders are still willing to give students like you a chance to buy a car under special circumstances. Here are the things you need to consider to get approved for a student auto loan easily.
If you have a part-time job and been receiving a steady paycheck for several months, a lender will see you as a favorable candidate for a student car loan. Just show them a proof of income.
But if you haven’t gone into a job yet, we’ve got some suggestions for you:
- library assistant
- sales associate
Save up for the down payment. This also means you should make one when it’s time to buy a car. Not only does a down payment reduce the costs of any car you choose but it also sends a signal to the lender that you are a responsible young adult.
The ideal down payment is 20 percent of the purchase price, which can be too hefty for a student like you. But 10 percent will do. The idea is to have some money to hand the dealership upon purchase as initial payment.
A cosigner with an excellent credit score is also a positive sign to a lender. A cosigner reduces the lender’s risk considerably as he or she guarantees payback if you are unable to complete the payments.
Cosigners are not easy to find, though. But you can ask one of your parents, a relative or a close friend to sign the loan agreement with you.
You should, however, pay on time so that you wouldn’t damage your credit and your cosigner’s.
One of the most important factors for credit approval is creditworthiness. Lenders evaluate this through your credit history.
But since you’re still a student and you lack credit history, you should spend some time establishing your credit first before applying for an auto loan. You can do so by making small and regular purchases with a credit card.
Don’t buy an expensive car. Remember that you are considered as a high-risk borrower. Lenders then want to see a realistic vehicle choice.
Choose a ride that is fuel-efficient and performs just right. You don’t need a luxurious, high-performance, gas-guzzling car at this point. Save your dream car for the time when you can really afford it.
You can get approved for an auto loan more easily if the car you will be buying is inexpensive. That not only benefits lenders but also helps you pay back on time.
- Mind the expenses after the purchase. Keep in mind that owning a car comes with other expenses like gas, maintenance, repairs and parking fees. And remember that you also have to pay your bills and spend for your food and books.
- Don’t spend a lot. After buying a car, minimize your expenses. Be more frugal because you don’t want to miss payments and eventually damage your credit.
- Go to different lenders to find the best offer. Don’t be quick to agree to the first offer you get. Do some math and compare price quotes before choosing a lender to get an auto loan from.
- Do not sign on the dotted line unless everything in the loan agreement is clear and accurate. You have all the right to raise concerns and question the clauses in the contract before signing it. Do so to avoid getting ripped off by dishonest and abusive lenders.