Student Car Loans: Making Payments, Making the Grade
March 6, 2014 / Sara Davis / Prepare for College Financially
Student Car Loans 101
College is a time when many young people are concerned both with establishing credit and getting where they need to go independently.
But with no credit and likely no job history, college students face multiple challenges when looking for a reliable vehicle. Are you a college student who needs a vehicle? Do you have children leaving for college and want to make sure they have transportation? Let’s take a look at a few helpful tips to aid students in the quest for a reliable vehicle.
Research Financing Options
Students often mistakenly think that there are no financing options available to them. On the contrary, students have more financing options than ever. In addition to going to your bank or credit union, there are many resources available online for students who need transportation. If you have an established relationship with a lender, apply for financing with them first. Otherwise, there are multiple online companies that specialize in student car loans.
Special Student Loans
Whether or not you have established credit, student car loans can help you get a vehicle while you’re in college. This type of loan has multiple benefits, including lower interest rates and the ability to pay after graduation. Additionally, student car loans generally give students a little more wiggle room when looking for a car. Before getting approved for a student car loan, a cosigner is required. Students often prefer car loans over leasing because there are little, if any, hidden fees.
Cosigners Help Students Land a Vehicle
For students with no credit, having a cosigner is one of the best ways to purchase a vehicle. When choosing a cosigner, it’s important that the cosigner has at least a stable credit history, if not good credit. The better a cosigner’s credit history is, the risk associated with a student car purchase decreases. However, cosigners should enter into this agreement with caution. If you’re unable to pay your bill, the responsibility of payment will fall to the cosigner.
Plan for a Down Payment
I know what you’re thinking, “How can a broke college student afford a down payment?” Indeed, sometimes it can be tough. But, if it’s at all possible, planning for a down payment has two main benefits. First, your overall monthly payments and total amount owed will be lower. This means that your less-than-stellar student interest rate accrues on a much smaller amount – lessening your overall financial burden. Second, saving a down payment as a college student speaks volumes about your level of responsibility. Your lender and dealership will most likely recognize your commitment to responsibility, which may result in a better deal.
Mind Your Budget
As a college student (or the proud parent of one), you know that cash flow is limited. The best way to safeguard your vehicle purchase is to establish a reasonable budget and stick to it. Although many college expenses, like room and board or meal plans, can be paid with scholarships, grants or loans, it’s important to estimate your monthly cash flow and plan to make vehicle payments accordingly.