If you’re a student and under 25, you may have a lower credit score due to a young credit history. Many auto lenders want to see a robust credit history and consistent income, which can make qualifying for a car loan tricky during college years. However, first-time car buying programs exist, and there are lenders willing to work with college students.
Whether you need a car loan now for your daily commute or job, or this is your first-ever auto loan, here are some lenders willing to work with typical college student circumstances.
If you'd rather skip the dealership experience and your income is limited due to schooling, Carvana could be a great option for financing as a working student. It's an exclusively online dealership with used and new vehicles. You must have an annual income of at least $4,000 to qualify, which is considerably low compared to other auto lenders.
But, the maximum rate is high — rates range from 3.9% to 27.9%. If you can help it, we recommended checking rates elsewhere before settling with Carvana. Rates aside, its very low income requirement is what makes this lender a solid choice for part-time workers and college students.
CarsDirect is a dealership connection service. Its nationwide network is largely composed of bad credit auto lenders, including buy here pay here (BHPH) dealerships, famous for no-credit check car loans. If your credit history is poor, or you don't have any credit history at all, a BHPH dealer could be the ticket.
However, BHPH dealerships are known for very high interest rates and only selling used cars — trade-offs for the lack of credit check. CarsDirect service is free to use, but you may have to deal with a large volume of calls. And since it's a connection service, there are no ranges of rates, loan amounts or credit score requirements available.
LendingTree is a loan connection service that can help you quickly compare multiple options. Its partners offer rates starting at relatively low rates. But most will require you to apply a cosigner with good credit — typically a credit score of 670 or higher.
Kora, formally Boro, specializes in student car and personal loans. Its auto loan program is called KoraDrive. You must be a student to qualify for KoraDrive, and a good credit score or cosigner isn't required. There's a minimum loan amount of $5,000 with rates ranging from 6% to 16.49%. The loan can be for new or used cars, or to refinance an existing auto loan. Available loan terms are on the shorter side, ranging from 12 to 60 months. However, your grades in school matter: must have a GPA above 2.0 in undergraduate or above 3.0 in graduate school.
If you prefer a credit union for auto loans, then PenFed is worth checking out as a student. Unlike most credit unions, PenFed serves all 50 states. Its car loans are powered by TrueCar. Rates start at 5.19% for new car loans, and used auto loans start at 5.84% — pretty fair rates. Loan amounts are between $500 to $150,000, and terms range from 36 to 84 months, depending on if you're going new or used. However, to qualify for a PenFed auto loan, you must be a member, income requirements vary, and you're likely to need a credit score above 670 to qualify.
Quickly compare auto lenders side-by-side for the important pieces of vehicle financing.
Lender
Rates
Loan amounts
Loan terms
Kora
6% to 16.49%
Starting at $5,000
12 to 60 months
Carvana
3.9% to 27.9%
Not stated
12 to 72 months
CarsDirect
Varies
Varies
Varies
PenFed
Starts at 5.19%
$500 to $150,000
36 to 84 months
LendingTree
Starting at 1%
Varies
12 to 240 months
How we picked the best providers
We compared dozens of auto lenders to find the five best lenders to fit common college student situations. Factors include credit score requirements, interest rates offered, loan terms, borrowing limits, income requirements, cosigner requirements, and specifically located lenders that catered to college students or borrowers with a lacking credit history. Other considerations include customer reviews, Better Business Bureau ratings and accreditation and state availability.
Customer and BBB ratings can give you a better idea of how lenders do business or handle negative interactions.
Provider
BBB rating
Trustpilot rating
Kora
1.5-star rating, based on 4 reviews
N/A
Carvana
N/A
3.6-star rating, based on 5,561 reviews
CarsDirect
N/A
3.8-star rating, based on 147 reviews
PenFed
1.19-star rating, based on 224 reviews
4.6-star rating, based on 1,239 reviews
LendingTree
1.38-star rating, based on 101 reviews
4.6-star rating, based on 11,947 reviews
How to prequalify for a car loan
Auto lenders tend to prefer a long credit history, high credit score and low debt-to-income (DTI) ratio. Other common requirements have to do with work history and consistent employment. Some requirements typical with auto lenders to give you a baseline include:
Credit score at or above 670
Consistent monthly income with a DTI ratio below 45% to 50%
Down payment around 10% of the vehicle’s value, or more
No active bankruptcies or discharged bankruptcies less than 12 months old
No vehicle repossessions less than 12 months old
If you’re a newer borrower, you likely don’t need to worry about dings in your credit history — but a lacking credit history can also hurt. Without proof that you’ve handled repaying past loans before, you may face higher interest rates or hesitancy from auto lenders.
How to increase your approval chances with auto financing
If you’re a young borrower with a sparse credit history, here are a few things you can do to increase your chances of preapproval for a car loan.
Cosigner for lacking credit score. A cosigner is the equivalent of “vouching” for someone. The cosigner promises to repay the auto loan if you default, and with two people backing the loan, it can greatly increase approval odds. However, auto lenders prefer cosigners with a good credit score.
Coappliant for a lacking income. If your income isn’t meeting requirements, a coapplint (or co-borrower) could help. A coappliant’s income is added to your own, and can increase the loan amount you qualify for. Both borrowers are equally responsible for the loan and installment payments, and both credit scores are considered. Most often, coappliants are life partners or spouses.
A large down payment. Auto lenders may require you to have a down payment of at least 10% of the vehicle’s value, or 20% if it’s a new vehicle. By having a large down payment, you’re decreasing the amount you need to borrow and showing you have the financial stability to save up for a lump sum payment. A trade-in can also help meet a down payment requirement.
Rate shopping and hard credit score pulls
The FICO credit scoring model counts all hard inquiries of the same type as one hard inquiry if all are done within 45 days. VantageScore counts multiple hard inquiries of the same type as one hard pull if you do it within 14 days. These credit scoring models know that when you apply for new credit multiple times in a short period, you’re looking to borrow and you’re comparing rates. Try to do all your rate shopping within two weeks to avoid excessive dings and avoid applying for other types of credit, such as credit cards, when shopping for a car loan.
Alternatives for auto loans
If you’re not having any luck with auto lenders, here are some alternatives.
No credit check dealerships. There are dealers willing to skip the credit check when applying for an auto loan. But without a credit check, higher rates are likely. While rates vary by lender, you may have to plan for a rate in the double-digits, increasing the amount you pay for the vehicle immensely.
Cash is king. When all else fails, dealerships and individual sellers are more than happy to accept cash for a vehicle. However, that may mean only spending a few thousand on a car, and unless you’ve got at least $20,000 saved up, you’re likely to be in the used section.
Bethany Hickey is the banking editor and personal finance expert at Finder, specializing in banking, lending, insurance, and crypto.
Bethany’s expertise in personal finance has garnered recognition from esteemed media outlets, such as Nasdaq, MSN, Yahoo Finance, GOBankingRates, SuperMoney, AOL and Newsweek. Her articles offer practical financial strategies to Americans, empowering them to make decisions that meet their financial goals. Her past work includes articles on generational spending and saving habits, lending, budgeting and managing debt.
Before joining Finder, she was a content manager where she wrote hundreds of articles and news pieces on auto financing and credit repair for CarsDirect, Auto Credit Express and The Car Connection, among others.
Bethany holds a BA in English from the University of Michigan-Flint, and was poetry editor for the university’s Qua Literary and Fine Arts Magazine. See full bio
Bethany's expertise
Bethany has written 401 Finder guides across topics including:
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