Student Car Loans Build Credit Rating
Qualifying for student car loans while you are a college student can be a challenge if you have a low credit score.
Students have tuition and fees to pay, and books to buy.
Your time is limited to working part-time to earn money if you want to keep up with your classes and make a high GPA. The trade-off is difficult.
Then there is your credit score.
Many students have never purchased anything on credit in the past and now find themselves with no credit history and a low credit rating.
They are also considered high risk by auto finance companies and are rated as bad credit. This may force them to shop at rent to own car dealerships or buy here pay here lots.
However, there is a better way, which we will cover below.
How Low Can My Credit Score Be To Get A Car Loan?
Getting car loans for college students with no credit and a low credit score is difficult. Students that have never defaulted on an auto loan or have never had an auto loan deserve a good APR with a car loan.
However, qualifying for a car loan with a lower APR and student auto loans for college students with bad credit are difficult to get.
Most car financing lenders require a credit score of 640 or better.
Thankfully lending companies are willing to take a lower credit score if you have a good credit history of on-time payments.
Valley Auto Loans works to overcome your difficult credit rating by finding Auto loan lenders for you, that offer good quality student auto loans to college students.
Student Auto Loan Options to Build Student’s Credit Scores.
Now there are financial options available that will help you get loans for college students with bad credit and get behind the wheel.
A variety of auto finance lenders can structure car loans for college students.
There is no need to use your student loan funds to purchase a car while you are still in school.
Many college students are first-time car buyers and new at getting a car loan. Many have not established a credit history yet.
To money lenders, you are considered to have subprime credit and are categorized as a high risk of paying back a car loan.
The problem is that banks cannot justify lending to students that don’t have any credit history.
Credit bureaus look at your past credit history and list any auto loans you have had, but no prior car loan history is better than a history of having missed car payments.
Some college students will visit a no credit check auto dealership that promises to approve everyone because of their lack of credit history.
It may get them a car but will make it difficult for a college student to get a good credit rating.
Your first step is to establish credit through a student loan for cars or a sub-prime or bad credit car loans for students.
Valley Auto Loans provides auto loans for students with good or bad credit.
Let us show you why Valley Auto Loans can find you auto lenders with the best car deals for college students. We do the loan searching for you, so you don’t have to.
Part-Time Employment Is Acceptable For Student Auto Loans
Some auto finance companies offer car loans for college students who hold part-time jobs.
These auto finance companies consider the student’s limitations when they review the student’s application.
For example, a full-time student cannot be expected to work full-time hours.
Therefore, the student’s income is likely based on part-time and temporary employment, but being a part-time employee does not disqualify the student from getting student car loans.
The critical factor in qualifying for student car loans is having some job income on your application that supplies at least $1,500.00 per month.
Auto loan lenders need to see a steady income from a reputable source such as part-time or full-time employment income.
Many college students that have never financed a car, have an advantage over students who have financed a car with bad credit history, even tho their credit is subprime.
This is because credit bureaus have started taking past auto loan history into account and look more favorably on those who have never had a car loan compared to loans for college students with bad credit who have had bad car loan issues in the past.
Getting Student Car Loans May Qualify For Lower Interest Rates
Banks and auto finance companies that offer a specialized student auto loan for students, generally provide a break on the interest rates for students.
For example, a bank may grant a 0.5 percent interest rate decrease for as long as the student attends classes. If the student is also a customer of the bank, they may receive more discounts.
Student Auto Loans With Extended Loan Terms
Banks that offer specialized auto loans for students may also extend the terms of the loan for lower payments.
For example, the financial institution may provide the college student auto loans with an extra six months to one year beyond the standard terms of the student car loan to lower payments.
Student Car Loan Programs Reduce Loan Fees
Cars for college students programs may waive origination and transaction fees on auto loans for college students, as well.
To find the best car loans, research online college student auto loans or check your bank, and the options they offer for student auto loans.
Note that many car finance lenders that offer student auto loans set a minimum amount for the car purchase amount. For instance, the total you borrow for your loan must be for $5,000 or more.
Check with your financial institutions to find out if they offer such a program for students.
Auto Manufacturers Offer Student Car Loan Cash Incentives
Auto manufacturers often provide financing options for auto loans for students with bad credit.
For example, the Ford College Purchase Program 1 offers students a $500 incentive, along with several financing options for the purchase of a Ford or Lincoln. Research the various auto manufacturers and explore the financing options offered to students.
To know the full benefits of factory incentives and rebates, see our advice and the tools we provide in our new car buying guide.
You will learn how to get the best deal on a new car, and you’ll be able to save yourself and your family a good bit of money on the car models you like.
Students Should Recognize A Bad Credit Trap
Car loans for students should not be a trap for bad credit. Take these steps to prevent getting lead into debt and possibly getting bad credit.
Using your college student loan for car financing could create a financial burden that will put you at risk of bad credit after you get out of school.
Valley Auto Loans has a resource page with lots of helpful tips and tools to help you with your car purchase and car financing as well as “how-to” make simple repairs and maintenance to your vehicle like closing a broken power window without tools. There is also a loan payment calculator to help you estimate your monthly car payments.
These steps and a little common sense will keep your credit in good standing.
- Build a Simple budget and stick to it. This will help with all your bills and financial commitments and your student loans.
- Build a good credit history. Use your credit cards carefully and responsibly to build a good credit score. This will ensure approval when you apply for larger amounts of credit later in life for a home or a business loan.
- Get the lowest APR possible for your credit rating and don’t sign for a loan unless you have a reliable resource for paying it back.
- Make all of your payments on time. Keep up the maintenance of your car so that it will hold the value of your investment.
Online Loan Services Offer Car Loans For College Students
Some online loan services, such as Valley Auto Loans, will match students with lenders to give them car loans for college students with bad credit.
Even if you have no credit or poor credit history, Valley Auto Loans can find a lender who will work with you to obtain approval for your student car loan.
If the vehicle loan is handled responsibly, you will build a good credit rating in no time.
Student Car Loan Interest Rates
Do your research to determine the interest rates for college student car loans from different lenders.
If you are a student and you are applying for your first car loan, you will probably pay a higher interest rate than an established consumer with a good credit history.
However, your interest rate should not exceed the norm by much.
For example, if interest rates for a conventional car loan are an average of 8 percent, you should not accept an offer from a lender for an 18 percent rate loan.
Though you should not pay an exorbitant interest rate, you will pay a bit more while you are establishing your credit.
Student Auto Loans – Who Qualifies?
Banks and financial institutions that offer a car loan for students require that the applicant prove that they are a full-time or part-time student at a college, university, trade, or technical school.
Students in graduate and post-graduate programs may also qualify. Some programs also invite recent graduates to apply.
Improve Your Chances For A Student Auto Loan
You can do a few things to improve your chances of qualifying for a car loan.
- A co-signer is available if needed.
- You can save up for a sizable down-payment.
- Check and repair your credit score.
- Hold a job that pays $1,500 a month regularly.
- Choose a car with payments you can afford.
Cosigners For Student loans For Cars
If your parents agree, you can ask them to co-sign for a car loan.
Not only will you improve your chances of obtaining approval for student auto loans, but your interest rates will likely be lower than if you qualify without a cosigner.
If you have a friend or family member instead of your parents, you can ask them instead.
However, when someone agrees to co-sign for your loan, they assume the responsibility as if they were taking out the loan themselves.
This means that the loan payments will count against their debt-to-income ratio if that person applies for a loan while you are making the payments on your student auto loan.
If something happens and you are unable to make payments on the cosigned loan, the cosigner becomes responsible for the payments. Cosigning student car loans for someone should not be taken lightly. However, using a cosigner is one way to build your credit and obtain a loan while you are still in school.
To qualify, you will need to provide several references to the lender.
Car loans for college students will require you to collect the contact information for at least five references and be sure to ask their permission to use them as a reference for your loan.
Though it can be challenging to save money as a student, if you can budget your finances in a way that allows you to save a significant down-payment for your car, your chances of getting approved for a student auto loan when you are in school are significantly improved.
The more of a down-payment you can save, the less you will need to finance with the loan. However, you still have to show the lender that you will be able to make the monthly payments, so you will need to demonstrate your ability to pay by proving your income.
Students Must Show Income To Qualify For A Student Car Loans
For the lender to consider your income as valid, your income must be verifiable. Many students work for tips and cash and find it hard to provide proof of income.
You will likely need to provide the lender with tax returns or W-2s from your employer to qualify for an auto loan.
However, some lenders will work with students who hold non-traditional jobs. Most student auto loan lenders will consider the student’s pre-tax income for this limit.
The borrower will still need to show that their debt-to-income ratio will accommodate the monthly payments of the student auto loan.
The only true way to know if you will qualify for a student car loan is to apply.
If you apply through Valley Auto Loans, we will work to find the perfect lender for your budget and situation. If you are a full-time student with a gross income of at least $1,500 per month, we can match you with a lender to finance your next car loan.
Calculate Your Limits For Your Student Auto Loan
Before applying for a car loan for students, figure out how much you can afford for your monthly payments.
Next, find a car loan calculator and estimate the total amount you can spend based on your desired monthly payment. Several free car loan calculators are available on the Web.
Just input your desired monthly payment, and then click the button. The tool provides you with the total amount of the loan you can borrow and stay within your payment limits.
It is nice to know how much you can afford before discussing loans or shopping for a car.
When you are matched with a lender from Valley Auto Loans, the bank will give you the terms of the student car loan, including the life of the loan and the number of monthly payments.
Before you sign the papers, work the payment schedule into your budget to make sure that you can carry out the monthly payments.
Remember that you will also need to pay for insurance, gas, parking, and maintenance for your vehicle.
Additional Considerations For Student Car Loans
You must make sure you understand the terms of the loan,
- Including the length of the loan.
- The interest rates you will be charged.
- How your down payment affects the payoff.
You will be making payments on the loan for years to come.
You need to take into consideration what will happen to your budget when your other student loan payments kick in. After all, the last thing you need as you begin your new career is excessive debt.
Student Loans and Student Car Loans
If you have borrowed student loan funds to finance your education, you may be able to use part of the loan to finance your car.
Most student loans allow for transportation charges.
However, not all do. Many will not offer college student car loans. You will need to read the fine print and ask your lender if there are any stipulations on your loan that prevent you from using borrowed funds for the purchase of a car.
When you graduate, your student loans are placed on a ten-year repayment plan. Loans for students cannot be written off with bankruptcy, and you will have to pay back every penny of the loan to the federal government.
Now, consider purchasing a car with some of the loan money.
The chances are that by the time the loan is paid off – in 10 or more years – you probably will not be driving the car you purchased with the loan funds. You will likely be making payments for another vehicle.
Student Car Loan Preparation
Before you apply for a car loan, open a checking or savings account, if you do not have one.
Your bank statements will be required for a student loan approval when you are matched with a lender.
Additionally, your lender may offer automatic payments that you can set up to debit directly from your account if you prefer.
Proof of Student Status
The bank will also need to see evidence of your status as a student.
You do not necessarily need to be enrolled full-time unless stipulated by the terms of the loan. However, you will need to prove that you are an active student at an approved institution.
Undergraduate and graduate students attending colleges and universities will qualify, but students attending trade and technical schools can also be eligible.
Even if you are attending trade school to obtain certification for your job, you may be able to qualify auto loans for college students.
College Students Proof of Income
As a student, you will need to show that you can make the monthly payments on the loan.
To do so, you need to prove that your income is at least $1,500 gross per month in steady income before taxes.
If you have a non-traditional job, such as a waiter or bartender, a majority of your income may come from tips.
You may be able to use your bank statements as supplemental proof of income if you can show that you regularly deposit your tips.
If you are a W-2 employee, your W-2 statements will sufficiently prove your income. Note that your W-2s must show the minimum income limits set by the lender.
Proof of Alternative Income
If you do not have a job that will support payments for a car loan, you can apply for your school’s work-study program.
Essentially, the college or university provides you with part-time employment, usually on campus, and you are paid as an employee for the hours you work.
You may be assigned to work in the bookstore, or another one of the campus facilities. You may be assigned to do office work for an administrator.
No matter the job you perform during your work-study time, you can use the money to make car payments if you so choose.
If you receive income from any other source besides employment, such as child support, you must provide the lender with proof of the additional revenue.
For example, if you are on SSI for disability, you can use the monthly SSI payments as an income source when you apply for the loan.
If you receive alimony or payment for a lawsuit settlement, these funds can also be considered as income when you apply for a student car loan.
Your First Investment
Some car dealers will take advantage of first-time buyers and try to sell many options the customer does not need.
The car you purchase with your student auto loan will probably be your first significant investment. This purchase will impact your credit history in a big way, so be sure to make your payments on time every month.
If you are late on payments, one or more of the credit reporting agencies are notified. Your credit rating suffers from each late or missed payment, and eventually, if payments are too far behind, the car can be repossessed.
Additionally, if you have a co-signer on the student car loan, late payments will also impact their credit rating. Only sign for and accept the loan if you are sure that you can make the payments over time.
Remember that the car you select will need to last for the life of the loan or longer, so make your purchase wisely. Car loans for college students can be a big plus when it comes to building credit for your future and getting you a more dependable car.
Be sure to act responsibly when picking out a car that is in your budget and making the payments on time.
Remember, you will also be paying on your other school loans for a long time, so do not overdo it with choosing high payment on student car loans.
Valley Auto Loans takes pride in helping people save money and get good transportation.
We are driven to help find you the best auto loans and refinancing available.
Invest some time to read through the material on our resource page, and you will gain useful tips car owners should not do without.
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