Car loans can work for anyone. A car loan allows you to borrow money to buy a car and then pay it back in regular instalments over a set period.
Many uni students do not have the budget to purchase a vehicle outright, so a car loan provides access to the financing needed to get a vehicle.
Applying for a car loan
There is a range of loan options available for uni students, which can depend on your financial situation.
You’ll need to be at least 18 years old and able to provide evidence of your income. You should mention how much you earn from paid employment and any Centrelink payments you receive within your loan application.
The amount you’re able to borrow will be determined by the lender, based on various factors such as your credit score, and your ability to pay back the loan. Uni students often have a limited credit history, a credit card or mobile phone contract can form part of your credit score.
A lender will typically check your credit rating before approving your loan application. You may want to find out your credit rating first, so you have an idea of where you stand, though it’s important to know that each time you or someone else checks your credit rating, your score may be negatively impacted.
Know your budget
Uni students have enough to deal with without worrying about the stress of paying off your car loan, so you need to make sure you find one with rates that fit within your budget.
Work out what you can afford before considering a car loan to ensure you don’t end up choosing one with too high repayments. Make sure you also understand the other costs involved with car ownership, such as petrol, insurance, registration and factor these into your budget.
A car loan calculator can provide you with an approximate guide of what your repayments might be based on the total amount of the loan. Uni students can also use it to estimate how much you can borrow based on what you would like to budget for your repayments.
Get the right car loan for you
Car loans come in various shapes and sizes, and it’s important to find the right one to suit your specific needs.
To find the right car loan, you need to do your research and compare the rates offered by different car loans. Though the rates available to you will depend on your circumstances.
When comparing car loan rates offered by various vendors, look for the comparison rate. A comparison rate includes all fees and rates involved with the loan, giving you a better overall guide of the cost of your loan.
As long as you can meet the criteria, banks, car dealers and lenders have loans available to students. Some banks have loans specifically for students, while other lenders offer regular personal or car loan options.
There are various types of car loans available. Secured car loans can be a good option for students who don’t have a great credit rating. This type of loan involves the car being held as collateral in the case that you don’t keep up with your payments.
If you have a strong credit rating and proof of regular income, an unsecured car loan may be a good option. This can offer a greater level of flexibility as you don’t need to worry about collateral, though interest rates may be higher due to the higher risk to the lender.
Make sure you understand the terms and conditions of your car loan before signing the contract and can comply with your repayment requirements. Also check for any additional fees on your car loan, such as administration fees and exit fees.
Get a guarantor for your car loan
For some students, you may want to consider getting a guarantor or co-borrower for your loan. This can be good for those with bad credit, or who haven’t yet built up their credit score.
The guarantor or co-borrower (often a family member or guardian) uses their credit rating to vouch for you, which can help you get better rates on your car loan.
Keep in mind, if you default on your loan repayments your guarantor will be responsible for the repayments, so it can be risky for them.
A guarantor could help you secure the right financing for a vehicle and improve your chances of getting approval for your car loan.
If you’re a uni student looking for a car loan or help with your financing options, contact our 360 Finance Specialists.