How to get a car loan as a college student.
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What types of car loans are available to students?
There are two main car loan types to choose from.
- Secured car loan. Secured car loans usually have lower interest rates because your car is used as collateral. If you default on the loan, the lender has the right to repossess the vehicle. Check that your car is eligible before applying as some lenders place restrictions on a car’s age and condition.
- Unsecured personal loan. If you want to purchase an older car or get a loan that covers more than just the cost of the car, consider an unsecured personal loan. You’ll likely need a strong credit history for an unsecured personal loan because they’re more of a risk for lenders. Interest rates may be higher, but if you default on the loan you’ll still have your car.
Compare car loans for students
How to find a competitive deal on a student car oan
When comparing student car loans, consider:
- Interest rate. Get the most competitive interest rate by applying to a number of different loan providers.
- Fixed or variable rate. With fixed rates, your repayments stay the same for the entire loan term, but fixed loans tend to come with more restrictions on early repayments. Variable rates change throughout the life of the loan, but you usually get early repayment flexibility.
- Fees. Take a look at the upfront and ongoing fees to get an idea of how much the loan will cost.
- Repayment flexibility. Are you able to choose how often you make payments? Can you make additional payments without penalty? Can you repay the loan early without penalty? These are things to look out for.
- Features. Does the loan offer any additional features? Some of these may include a preapproval, online account management, a car-buying service to help you find your car or discounts on other products and services.
7 steps to get a car loan as a student
Finding a car loan is pretty straightforward. Here’s how it works:
- Consider getting preapproved. Before deciding which car you want to buy, see how much you can borrow by applying for preapproved loan. This can give you more bargaining power at the dealership or an auction.
- Find a car. For private sales, look on car sales sites and the newspaper, or head to a dealership. Find a car that’s within your budget and in good condition.
- Compare your loan options. Start comparing your loan options once you’ve found the car you want or have an idea of what you’re looking for. Consider the interest rate, fees and features of the loan to find one that’s right for you.
- Check the eligibility criteria. Even if the loan sounds right, you may not meet its eligibility criteria. Lenders usually require you to be older than 18, earn a regular income and be employed. Your car will also have to meet eligibility criteria.
- Get your documents in order. Gather all the required documents that include a form of ID, pay stubs and information regarding your employment and finances (income, expenses and debts). Once you choose your car, submit the make, model and year, VIN number, registration number and purchase price.
- Submit your application. Depending on the lender, you may receive an instant response. Other lenders may take a few days to review your application and fund your loan.
- Buy your car. This can happen in a few ways. The lender may pay the dealer or private seller on your behalf or you’ll get funds to pay the seller directly.
What criteria do car lenders have for used cars?
Car loans for international students
Finding a car loan as an international student can be particularly tough: You likely can’t meet the income, credit or permanent resident requirements for most lenders. Luckily there are a few lenders out there like Boro that specialize in financing for people in your situation.
You might also want to look into your personal loan options as an international student — often these don’t require a US citizen cosigner and can be used to buy a new car. And if you do get a car, make sure you get insurance you can qualify for.
8 helpful tips for applying
If you’re a student you may be working part time, be on a lower income or have a limited credit history. This can make it difficult to get a car loan. Use the guide below to find out how to get approved for a car loan.
Ready to choose the perfect car?
Since this is probably your first car purchase, you may want to stick to an economical car. Here are some tips that can help you narrow down what you need:
- Shop around
- Attempt to haggle or bargain
- Ensure the vehicle you want meets the loan requirements
- Buy the first car you see
- Accept for the first loan offer you receive
- Apply for every loan available — narrow down your choices to three
You might have trouble getting a car loan on your own while you’re still in college. But it’s not totally impossible. By working with a lender that accepts students or allows you to apply with a cosigner, you could be on the road with a new set of wheels in no time.
Want to learn more about how car loans work? Check out our comprehensive guide.