Car loans for students can make a big difference in the life of a college student. This can be good or bad. On the one hand, having the ability to purchase a car gives the student better opportunities to find jobs that would have been too far to walk to. A car can also enhance their life allowing them to explore things to do within and outside the city. Some parents have to pick up their children from campus any time they want to see them. This is especially frustrating when the campus is some distance away from home.
On the other hand, many students have never been taught how to manage their money, especially not how to manage student auto loans. Many students rack up thousands of dollars of debt just with a credit card. Adding a car loan on top of that could be disastrous. The student might default on the loan and have their car repossessed. This is not only a traumatic experience but can ruin a students credit before they even enter the real world. Add the potential of thousands of dollars in student loan debt and they are starting life in a huge hole that some people never recover from. These issues are why many parents avoid auto loans for students all together and put the loan in their own name or buy a cheap older vehicle for cash that is really only meant to get them to and from work for a few years.
Student car loans aren’t really any different from any other auto loan. Many lenders don’t even have a product called a student car loan, but that doesn’t mean they won’t lend to students. The key is the same for any loan that can be had throughout life. Credit and income are the two biggest determining factors. People with bad credit will always pay higher interest rates than people with good credit and people with more money will always qualify for a bigger loan than people with less money. Students with really poor credit may still qualify for a loan if they can prove they have a large enough monthly income or a relatively large down payment. A cosigner such as a parent can go a long way in qualifying, especially if the student has no credit history. In the case of of a cosigner the lender knows that if the student can’t pay, the parent most likely will be able to.
Applying for College Student Car Loans
The application process for a college student car loan varies from lender to lender but some basic information is always needed. A social security number will be needed to run a credit check. The credit check brings up the person’s credit score from the three credit bureaus, Experian, TransUnion, and Equifax. There is really no need to look up your score yourself as it usually costs money and the lender you apply with is required to mail you your scores for free.
Next, a job history is needed. This is done to determine monthly income and job stability. Pay stubs are typically required along with the business name, address, and manager. Usually a lender likes to see at least a six month history at the current job but it’s not the end of the world if a six month history doesn’t exist.
The applicants basic information such as name, home address, previous addresses within the last 3 years, and rental history is also required. Rental history obviously doesn’t apply to people living with their parents or own their own home.
Proof of insurance is also required in nearly all cases. After all, it’s illegal to drive without insurance so the lender doesn’t want to provide car loans for college students that either don’t have insurance or can’t qualify for it.
The best place to apply for an auto loan is from a reputable lender. Applying to two or three is a good idea to make sure you are getting a reasonable deal. There are many companies out there that are willing to offer a car loan to just about anybody. But beware, the interest rates are often incredibly high and the default rates are through the roof. The lender doesn’t mind because they collect a higher than average down payment for the loan and if they have to repossess the car they just resell it to the next applicant, collecting another large down payment. These cars are sometimes resold to countless people until someone actually comes through on the payments. Sadly some people have no other choice but to go with this type of loan.
Car loans for students are a big responsibility that many young adults aren’t ready to handle. However, in the hands of a responsible student they can be vastly rewarding.
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