Consider the concept of a student having a car of their own when they’re in their late teens and still in school. Maybe once upon a time it may have been considered a luxury for a college student to have access to their own wheels, but these days it’s more of a necessity.
When you realize that lots of college students out there not only attend classes, but also have a part-time job (maybe even TWO) to help pay expenses, then a car becomes important. And that’s not even taking into consideration those students who go to a community or commuter type college, living at home or off-campus.
But therein lies the problem: lending institutions tend to be rather skittish about giving a student an auto loan when they don’t have a regular, steady full-time job that brings in a decent wage. It’s that whole adage of the only people that can qualify for a loan are the ones who really don’t need it. Yes, it’s insane. Welcome to the world of the 21st century.
Let’s see what the options are. Maybe you’ll find that, much to your surprise, when you read an article like “Are You Ready For A Car Loan?” rel=”nofollow”, the answer is “Yes!”.
There are options out there for a college student to get a new ride, or at least a new used ride!
If You Have a Checking Account …
You may not have a credit history yet, but if you already have a working relationship (a good one, of course!) with a bank, you may want to start there. Say you’ve been a loyal customer at a local bank and have a checking and savings account, and you’ve been good about not bouncing checks or incurring over limit fees. It’s not as compelling as having an established credit history, but it’s a start; after all, you’re a customer, not an unknown quantity.
Go Through a Finance Company/Credit Union
There are many financial institutions out there that are willing to take a chance on a first-time car buyer and underwrite a loan for them. As a rule, car loans are one of the easiest types of loans to get (easier to get approval for than it is for some credit cards, that’s for sure!). It’s a great way to start off a newcomer’s credit history.
Granted, the finance charge may be a bit steep; first-time borrowers often run up against anywhere between nine and fifteen percent APR, if not higher. But if you need a car, you need a car.
Check With the Car Manufacturers
Some auto manufacturers offer provide students with factory-direct financing incentives. If you pause and consider, it makes sense. After all, nothing builds brand loyalty better than starting people off on one particular product (like, say, a Chevy) and getting them accustomed to having it from that point on, because that was their first.
Co-Sign With a Parent
The other possibility is taking out a loan but having a parent co-sign, and let’s be realistic, it’s probably the most likely. The added security of a co-sign usually results in far more favorable loan conditions, because the risk to the lender is not as great. Of course, the parent’s credit report and FICO score will reflect the loan, which affects their credit history as well.
Some Words of Wisdom
Here are a few things to keep in mind when getting a car loan:
Banks and other lending institutions want to make sure that if they have to repossess a car due to loan default, it’s worth the trouble. Therefore, it’s not unusual for a bank to turn down a loan on an older, more beat-up car, but okay a loan for a nicer, pricier car.
Any money you can throw in for a down payment will increase your chances of acceptance, and possibly a better rate. If you current drive a real beater that’s on its last legs, it’s conceivable that you can bring it in and have a few hundred dollars knocked off the price.
If you can handle a larger monthly payment, try to go for a loan that’s shorter term. Again, you could possibly negotiate a better rate if you commit to fewer payments.
If you want your car loan to help establish your credit history, you may have to be patient. It’s not unusual for a car loan not to appear on a newbie’s credit report until a year’s worth of payments are made.
Any car that’s financed by a lender is going to have to be insured to the hilt. That way, if there’s an accident, they get their money back. Check articles like “How Do You Find The Best Insurance Quotes?” for some help in shopping for car insurance.
Kimberley Laws is a regular contributor to HowDoYou.com and the author of two blogs, The Embiggens Project and Searching for Barry Weiss. A "Jill of all trades," she is a High School English Teacher and Certified Career Counselor with a background in makeup artistry, retail banking, and graphic design. She is also a scrapbooking, PEZ-collecting, car enthusiast who loves travelling and New York City.
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