Getting a car loan for students can seem like an impossible task. After all, most lenders are looking for people with steady incomes and good credit scores to lend money to.
However, there are some great strategies that you can use to get approved for a student car loan. This article discusses how to find the best possible loan rates and how to work your way through the application process so that you can drive off into the sunset with your new set of wheels.
Steps to Apply for a Student Car Loan
Establish Your Creditworthiness
Before you do anything else, you must establish your creditworthiness with the lender. According to Lantern by SoFi, “When an individual applies for a loan with a new lender, there is typically a credit check of some kind.” Confirm that the information you provide is accurate before submitting the application.
One way to make sure this happens is by paying your credit card bill on time every month. This will help you build up a good history of paying your bills on time. Timely payments are the best way to show that you are responsible with money and can repay what you owe when it’s due.
Get A Guarantor
Another strategy is to get a guarantor. A guarantor is someone who will have someone co-sign on your loan with you. Guarantors are promising the lender that if for some reason you can’t pay back what you owe, then they’ll do it in your place. Lenders like this because if you default on the loan, they will have a second person to go after for repayment.
Create An Elaborate Repayment Plan
Be sure to offer a repayment plan for any of your auto refinance loans and make sure it is simple and easy for the lender to understand. If they don’t think you will pay back what you owe, then the chances are high that your application will get denied. The more proof of income sources you can show them, the better.
You can also offer to put your loan into a pre-authorized debit program that will allow them to take money directly from your account each month without you having to do it manually. This way, there is no risk of missing any payments and getting yourself in trouble with the lender.
The Downside to Student Car Loans
High-Interest Rates
One of the downsides to getting a student auto refinance loan is that interest rates are generally much higher than they would be for someone with an established credit history. High-interest rates mean that if you were thinking about paying off your car early, then chances are high it will cost you hundreds or even thousands more.
Limited Credit
Another downside is that you are limited in terms of the credit history you have. If your loan defaults, it may be harder to get another one because lenders see this as a red flag that no matter how much money they lend to someone with poor repayment habits, they will still default on what they owe.
By following these steps, you should qualify for a student auto loan and get on the road with your new set of wheels.