Does student debt keep you from buying a car? Will the dealership take one look at that debt and run the other way? The answer to both questions is no. You’ll absolutely be able to buy a car—but before you jump into it, you should understand why having a car is important.
Cars Are Important
Having a ride gets you where you need to go. Think about how important it is to get to work to pay off those student loan bills. Maybe you’re still in school—getting to class is what’s going to help you get good grades and lead you to a good-paying job. It’s also convenient to have a car. You can lose a lot of time waiting for public transportation, time you can spend working or studying. And let’s be honest, it’s a little hard to take your lady out without a ride. If you want to see dates happen, you better be able to pick her up. However, remember the car isn’t the only thing making an impression. How much confidence you have and how well you treat someone will go a long way as well.
What Helps You Get a Loan?
So maybe now you’ve decided that yes, a car is important for you to have. What next? Your student debt will affect how potential lenders view you. However, what you’re doing with it is even more important. Have you made regular, on-time payments, or have you ignored it and gotten behind? If you haven’t paid for a while, the first thing you’ll want to do is start making some regular monthly payments to show that you’re serious about reducing your debt.
A student loan can even be a positive thing as long as you’re paying it. It can improve your overall credit score by adding diversity, building a history, and increasing the length of that history. If it’s added to other types of loans that are paid regularly—like credit cards or mortgages—it can be a very good thing.
Know Your Score
When did you last pull your credit score? Did you know that you can get it free once a year? Knowing your score will go a long way to helping you improve it, and also prepare you for what lenders are going to see when you apply for a car loan. If you find your score is less than ideal, you’ll need to work on it for a bit first. Here are some things you’ll see on your credit report.
• Loans – The type of account, when it was opened and the loan limit.
• The Balance – How much you still owe.
• Payment History – This section will be something lenders will look at closely. It can play a bigger role in whether you get a loan or not, because it shows how seriously you take your monthly payments.
Your student debt will play a huge role in your score and how creditors view you. You don’t want to be behind in payments, you don’t want to be in collections, and you certainly don’t want your wages garnished. If you’re in a bad financial situation, talk to your student loan holder about deferment or forbearance, which allows you to start payments later. It shouldn’t be your top choice, but it can give you time to get your finances in order, and will save your credit score.
How to Approach a Lender for a Car Loan
If you feel your credit is strong enough, it is still beneficial to be prepared when you go to apply for a car loan. You’ll want to have a few items with you.
• Proof of Income – Have bank statements, pay stubs, or anything that proves regular income or enough money.
• ID – Something that proves you are who you say you are. Driver’s Licenses are best.
• Proof of Residence – Utility bills or other bills work best.
• A Down Payment – Try to have at least something to let them know you really want that car. Most lenders like to see around 20%.
Show them you’re responsible by choosing a car that fits your budget, no matter how much you want that Bentley. Be honest. If you recently started paying on your student loan after a series of late payments, tell them you’re working on making a change, and that you’re ready for a car payment. Realize you may not get the best interest rate, and factor that into the price.
Student debt isn’t the end of the world—especially if you handle it correctly. It won’t keep you from getting a car loan. If you’re ready to purchase your new ride for work, convenience, and dates make sure your student debt isn’t negatively affecting your credit. You’ll be driving a vehicle in no time.
