Student car loans
Buying a car can be one of life’s more cumbersome purchases. It’s often up there with getting married and buying a house. Most students in Australia are neither property owners nor married, so buying a car is likely to be their biggest purchase to date. And students aren’t widely renowned for their expendable income.
If you’re a student and you’re looking to purchase a car and are struggling to stump up the costs, RateCity will help outline some potential options to help you make the most informed financial decisions.
Where can I get a car loan for students?
The types of car loans that you can apply for as a student may be limited depending on your financial circumstances and credit score. Saving can be hard when you’re a student already on a tight budget, and though an interest free car loan from the bank of mum and dad might be an option for some, asking your parents for help isn’t available to every student. For the students in this bracket, there are car finance options available.
There are several things to consider as a student before diving straight into a loan application. Firstly, you ought to consider your credit score. Lenders will look at your credit score to determine your risk value when trying to get a loan, and this in turn affects your likelihood of approval and the rate you are offered.
What’s a credit score?
A credit score is your personal financial history. It is shown as a number and is determined based on numerous factors:
- Your age and address
- Meeting bill payments on time/defaulting on bills
- The type of credit you have against your name (if any)
- Whether you meet your credit repayments/whether you default on credit repayments
- The number of credit enquiries you have issued
- Bankruptcy/personal insolvency
Any single or multiple of these factors can bring down or increase your credit rating.
Can I get a car loan with no credit?
Having no credit history is unusual but may be the case for some students if you have yet to be financially independent. You could find yourself with no credit score if you have never paid bills, been on a tenancy, or been employed. While having no credit isn’t a bad thing, it also doesn’t appeal to lenders because they have no indication of your financial competency, and you may find that you are subject to the same struggles for approval and higher rates as someone with bad credit.
While you might be able to find car loans with a no credit check policy, most lenders will want to see your credit history. Be wary of lenders that offer “no credit check” loans, as they may be a scam.
Can I get a car loan with a guarantor?
If you are a student and looking to purchase a car, getting a guarantor car loan might be an option for you. Guarantor car loans are loans that are secured by someone who can guarantee to make the repayments if you default on your loan. Your guarantor will need to have a good credit rating to be able to secure your loan.
Guarantor loans might prove to be beneficial to those with little or no credit history, as it can make lower interest car loans more accessible to you. But, be sure to only apply for a guarantor loan if you know you can make the repayments, as you don’t want to leave someone else with your debt on their hands.
RateCity’s car loan calculatorcan help you and your guarantor understand how much your student car loan’s repayments are going to be. But perhaps more importantly, make sure you and your guarantor understand each other’s responsibilities and rights.
How do I increase my chances of being accepted for a car loan?
|You are more likely to be accepted for a loan if:||Because:|
|You have a guarantor||Having a guarantor reduces the risk to the lender if you default on payments, and will make them more likely to accept your application.|
|You have a job||Even part-time employment will show potential lenders|
|You borrow less|
Lenders are more likely to accept an application for a smaller loan, because it reduces the risk of you being unable to repay it in full.
Try to be realistic about your choice of car, or work towards saving a percentage of the cost yourself.
Did you know?
According to topuniversities.com, Australia has 12 universities in the global top 200 for earth sciences, and 13 for environmental sciences. Read about how many Australians are also now considering alternative fuels.