Students, more often than not, are on extremely limited incomes and have limited credit histories. These factors can make securing a car loan difficult for the average student. There are ways to make car loans easier to get and keep up with if you are a student, and these tips should help you achieve the appropriate financing.
Know Your Budget
The first step in getting a car loan as a credit or income challenged student is to know your budget. Do not limit your budget considerations to the monthly car loan payments. Take every car related expense into account, including gas and routine maintenance. A clear and complete picture of how much you can afford to spend each month on your vehicle and its loan will hopefully stop you from overextending your financial resources, which often results in repossession of your financed car and a big hit to your credit rating.
Shop Around
Do not stop shopping for loans just because the first place you went to said no, or even if you were offered a financing deal. The responsible course of action while trying to finance a large purchase like a car is to shop around for all available options for which you are likely to qualify. Review applicant qualifications and financing packages with your bank, private lenders and the dealership from which you are buying the car. Careful loan shopping will make you more likely to wind up in the best possible financing for your current situation.
Consider Cosigners
A common strategy among students trying to get a car loan is the use of a cosigner. Cosigners ostensibly lend their credit rating and income level to the financing process as a back-up, in case the primary borrower stops being able to keep up with the monthly payments. Students most commonly rely on parents as cosigners, as the relationship is relatively stable and parents tend to have more attractive credit scores than their children. Before committing to a car loan with a cosigner, make sure the cosigners understand the responsibility and potential financial obligations of helping you with your student car loan.
The Down Payment
Higher down payments mean lower loan principals and loans for less money are often easier to get approved as a student with limited credit history and a restricted income. Prepare for the car buying process by saving up as much as you can to put toward the down payment. The recommended down payment is at least five percent of the car’s total asking price, but over ten percent will make a more significant impact on the financing process.
The key to a stress free student car loan is financial planning. Prior to applying for loans, know your budget and for which offers you are likely to qualify.
