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.
- You can get a co-signer.
- 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.
Co-signers For Car Loans
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 the loan, but your interest rates will likely be lower than if you qualify without a co-signer. 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, he assumes the responsibility as if he were taking out the loan himself. This means that the loan payments will count against his debt-to-income ratio if he applies for a loan while you are making the payments on the loan.
If something happens and you are unable to make payments on the co-signed loan, the co-signer becomes responsible for the payments. Co-signing student car loans for someone should not be taken lightly. However, using a co-signer is one way to build your credit and obtain a loan while you are still in school.
Whether or not you use a co-signer for your loan, 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.
Down-Payment For Your Car Loan
Though it can be difficult 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 greatly 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 to 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 loans lenders will consider the student’s pre-tax income for this limit. The borrower still needs to show that his debt-to-income ratio will accommodate the monthly payments.
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 An 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 good 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 amount of monthly payments. Before you sign the papers, work the payment schedule into your budget to make sure that you can make the monthly payments. Remember that you will also need to pay for insurance, gas, parking and maintenance for your vehicle.
Additional Considerations For College Students
You must make sure you understand the terms of the loan, including the length of the loan
, in addition to the interest rates. 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.