As you probably know, car lenders always check an applicant’s credit report before approving them for a car loan. But as a student, you may well find yourself with no credit history to speak of. You’re not the only one. The majority of college students, even recent graduates, have simply not had enough time to establish a solid credit history. Unfortunately, that can make you a high-risk borrower in the eyes of car lenders.
Students with No Credit: Getting Approved
For this reason, it used to be notoriously difficult for students to get approved. You would have to shop your credit application to multiple banks, credit unions, dealers — a process that could take weeks. But My Car Lender does the homework for you, maximizing your chances of getting approved through an online application interface and one of the largest lender networks in the US. With the magic of the internet, you can accomplish what used to take weeks in just a few minutes. To apply online, click here.
3 Guidelines for Student Car Loans
Car loans for college students can come with high interest rates due to limited credit history and income. To get the best rates possible, we recommend you take the following 3 steps if possible:
- Down Payment: this can be made in cash, or trade equity if you have an existing vehicle. By putting money down, you will decrease the amount you have to finance, thereby lowering your monthly payments. Additionally, the smaller your car loan the better chances of getting approved. That said, some lenders definitely approve car loans for students with no money down.
- Cosigner: getting a parent with good credit to cosign your student auto loan will make your application far more attractive to potential lenders, decrease your interest rates, and decrease your car payment.
- Income: a job with consistent earnings, preferably in excess of $1500 per month, will make you a more ideal candidate to lenders. After all, they want to see that you have the income to repay your car loan. Some lenders allow up to 60% of your earnings to be allowed for car payment, but most prefer a figure closer to 20%.
Car Deals for Students
Several automakers including GM offer student car deals. To qualify, you either have to be enrolled as a college student or be a recent graduate. These car deals generally come in 2 types:
- Student Car Discounts: these are cash-back rebates or, in the case of GM’s College Discount program, a straightforward discount off the vehicle’s MSRP. In either case, these price savings often amount to $1000 or more.
- Student Financing Deals: these are financing packages tailored specifically to college students or recent graduates. They often entail incentives like low-rate APR financing, delayed payments, and more liberal credit requirements.
Best Used Cars for Students
The best student cars are generally used cars. Why? Because a used vehicle is cheaper to buy, cheaper to insure, and less subject to depreciation. New cars too often put consumers into a financially disadvantageous position: that of negative equity. Because a new car loses 20% or more of its value the moment it rolls off the lot, borrowers often find themselves trapped, owing more on the vehicle than it’s worth. With student loans already a factor, no student wants to find themselves with that kind of upside down auto loan. Fuel-efficient, minimal-maintenance compact cars are usually the smartest buy. However, we can’t claim we always made our vehicle-purchasing decisions so prudently as students.