Tips for Getting a Car Loan as a Student
Many college students need a car to get to classes and work. This necessity creates a new challenge as many questions whether a college student can get a car loan. Unfortunately, getting approved for a car loan is a lot tougher for students than other borrowers. However, it is possible and there are ways to improve the chances of getting approved.
[ READ MORE: How to Save Money in College ]
How to Improve the Chances of Getting Approved for a Car Loan as a College Student
- Get a Steady Source of Income
- Every lender wants to be repaid by the time the loan matures. If you don’t have a steady source of income, then you won’t be able to afford the vehicle you want to buy. If the lender thinks they are at risk of not being paid, they will reject your application. Unfortunately, this creates a barrier for students with busy class schedules. We suggest getting a part-time job if able.
- Start Building Credit As Soon As Possible
- Your credit score details how likely you are to repay your loan on time. The higher the credit score, the more likely you will be approved. While getting a loan is possible with bad credit, you may have higher interest rates attached to the loan.
- Save Money for a Down Payment
- Before buying a car, you should put aside some money each month for a down payment. If you save for a $500 down payment, then you will need to borrow $500 less than your purchase price. Since there’s no interest on a down payment, you will save money in the long run. In addition, some dealerships will require a down payment of a certain percentage of the vehicle’s value, so it’s good to start saving early.
- Get Good Grades While in School
- Many lenders will review your GPA as part of the decision process in whether to accept your loan application. By having good grades in school, lenders will see you as a motivated person and reward you by potentially offering lower interest rates. Someone barely passing may get higher interest rates and can have a harder time securing the loan.
- Consider Signing with a Co-Signer
- If you can’t pay off a loan by yourself, consider signing with a co-signer. A co-signer will agree to pay if you are unable. This should be a trusted person like a parent. Note that the co-signer’s credit is also on the line, so don’t blow off your payments simply because you have a co-signer. If you do, that person is now responsible and may never help you financially again!