College students rely on vehicles for work, school, and other important aspects of life just as much as older and established consumers. However, unstable incomes and limited credit histories make it harder for some students to get approval on a car loan. If you or the student in your life need help financing the purchase of a car, the tips below can make loan approval easier.
Even if you are like the average student and are in the process of building a credit history, you still need to know what your limited credit history says to potential lenders. Look for inaccuracies in your credit report or unpaid debts that can be taken care of, which will improve your credit rating. Make sure bills you pay every month are in your name, especially if those payments are reported to credit agencies.
Not only should you maintain employment as often as possible while you are a student, but you should also keep both employment and income records. When you apply for a car loan, whether you are a student or not, you will most likely need to provide proof of income. Get in the habit of organizing pay stubs, income tax returns, and any other proof of ongoing income you have before you start the car loan application process.
Take time to save as much money as you can to put toward the down payment for a used car. Smaller loans are easier to get approved with a limited credit history. Larger down payments reduce the amount being borrowed with a car loan, which will make the repayment process easier and less expensive. Lenders are more willing to take a risk on an applicant requesting smaller amounts of money and you will accrue less interest over the shorter repayment timeframe.
Student car loans are more likely to get approved when there is a non-student cosigner on the loan as well. The most popular and recommended choice for a student’s car loan cosigner is a parent or other well-established adult family member. Your cosigner’s credit worthiness will supplement yours, making the loan less risky for the lender. Keep in mind that a cosigner is taking financial responsibility for the loan’s repayment and their credit will be affected.
Students trying to finance the purchase of a used car can find a loan if they are properly prepared for the loan application process. Have a plan for credit worthiness and prove income before shopping for a car to make the loan process simpler and less stressful.
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