Student Car Loans
Can you get a car loan as a student? Find out your car financing options and tips to get approved.
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Student Car Loans
Life without a car can be difficult, especially in a country like Australia. However, students who want to buy a car often encounter situations where they cannot afford to pay for it in full. In these cases, a student car loan can help a lot. If you are a student and you are thinking about getting a car loan. Here is some information that you need to know.
Can I get a car loan as a student?
It is important that you understand the criteria for student car loans so that you can get prepared before you apply for one. Here are the things that lenders will check:
Credit Score
Checking credit scores is a necessary step for every lender. By going through your credit file, the lender will gain an understanding of your credit status. In Australia, the most common system used for a credit score is Equifax Score. There are five statuses under the Equifax Score system: Below Average; Average; Good; Very Good and Excellent. The higher your credit score is, the better chance we will have to secure a student car loan.
As a student, you might not have an extremely high credit score due to a lack of credit history. However, here are some things you can do to contribute to your credit score.
- Pay your bills on time.
- Try to keep your credit card limit low if you have a credit card. (Having a credit card can contribute to your credit file if you manage it wisely.)
- Do not put in enquires for finance too open.
- Do not change your residential address too often.
Residential Requirements
To be qualified for a student car loan, you will need to meet lenders’ residential requirements. Most student applicants are Permanent Residents or citizens of Australia. However, there are some lenders accept temporary visa holders depending on the visa type and the time left on it. Student Visa’s however are generally not accepted
Age
Most of the lenders accept student applicants who are older than 18 years old. Commonly, lenders have a maximum lending amount for 21 years old and under, they may limit your loan amount to $20,000 as an example if it's your first time lend. There is no set amount however as it does depend on your income.
Income Requirements
Lenders have income requirements even for student applicants. Some lenders approve car loans for applicants who only have 1 month working experience as part/full-time employers or 3 months in the current causal job. Beware that many lenders do not accept Newstart, Austudy, and Youth Allowance. However, as students have a relevantly low living expense, you do not need to have a very high income to be qualified for a car loan. A regular casual job that you do whilst studying can do the job. It is important to keep your income regular. Sometimes, Lenders prefer student applicants with lower but regular income than the ones with higher but seasonal income.
Steps for getting a car loan as a student
Find out how much you can afford
You can use our car loan repayment calculator to find what will your repayments be. When you are planning your finance, it is wise not to take too much risk. Find an amount that you can afford easily can save you a lot of trouble in the future.
Shop for a car
Once you have set your budget, you can shop for a car you like. If you have a tight budget, you might find private sales will provide you more room for negotiation price.
Compare finance
Compare the rates and repayments between possible lenders. If you are purchasing a car from a dealer, they might offer finance for it. Beware that dealers might add in fees on the car for ‘lower’ rate finance. If you are unsure whether to get a loan from a dealer or not. It is worthwhile to compare the dealer’s finance with a car finance broker.
Tips for getting your student loan
Things you should do
Put down a deposit for the car
Paying a part of the car in cash will give you a better chance to get a car loan. It proves to the lender that you are good at managing your funds. Not to mention, It also lowers your repayments.
Consider a guarantor or a co-applicant
If you are having trouble getting a student car loan on your own. You can try to add a guarantor or a co-applicant in your loan.
A guarantor can be one of your parents or your partner, by signing the documents with you. It means if you cannot repay the loan, your guarantor will be liable for it.
The co-applicant of your loan is normally your partner. However, some lenders allow one of your parents to be a co-applicant to. Adding a co-applicant means both of your income will be assessed at the approval stage and both of you will contribute to the loan repayment. If you cannot get a student car loan as your income is too low, adding a co-applicant with stable income will give you more chances to get a car loan.
Keep your income stable
If you are thinking about applying for any type of finance. It is important to keep your income stable. As we mentioned before, the lender prefers a stable income than seasonal income. This means a part-time job might benefit you more than a casual job with unstable working hours and income.
Things that you should avoid
Avoid applying for finance too many times
Make too many finances enquires in a short time will harm your credit file. If you made one enquires and got rejected, you need to ask the reasons and work on improving the rejection reasons. Keep making enquires will not help.
Avoid payday loans
Payday loans seem to be a good choice sometime. But it's high interest rates can hurt your saving progress. Moreover, too many payday loans are a reason that many applicants got rejected by car loan lenders. If you want to get payday loans, you need to think twice. Ask if you are can get a personal loan? Only approach payday loans if it is your last solution.
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