Car finance for students may seem a little out of reach since there is always the issue of repayment but you'll be happy to know that there are ways to get approved for a car loan in Australia even if you are a student.
Studying at a University or TAFE is very exciting since this is where you start building a career, this is where you put your plan in motion in order to live the life of your dreams.
One obstacle, however, that can slow you down is owning a car or getting approved for a student car loan. Some people are lucky enough that their parents buy them a car after high school but that is not always the case and majority of students still have to rely on car financing in order to own a car.
Tips to Getting Approved for a Student Car Loan
Build a solid credit history - This may take some time but this is your best bet in proving your credit worthiness and getting a lower interest rate once you apply for the loan.
How to improve your credit score
Pay your bills on time. Defaults can hurt your score for a long time so make sure to avoid them.
Don't go applying for credit cards you do not need. Keep one or two and manage them wisely. Opening and closing credit accounts relatively quick is bad too and should be avoided.
Check your credit report regularly. This makes you aware of your score and helps avoid identity theft.
Save up for a bigger upfront payment - The larger the down payment, the lower the interest rate and repayments. This also demonstrate your responsibility and financial capability so getting approved will be easier.
Get a Guarantor - A guarantor increases your chances of getting approved for the loan immensely. This is because the guarantor is bound to assume responsibility of the car loan should you start missing repayments. A parent or partner usually acts as a guarantor but make sure not to default on your loan so an not to put your guarantor in trouble.
Types of Student Car Loan
Secured - This is the most common type of student car loan and probably the most preferred by lenders. How it works is that if you miss repayments, the lender can repossess you car. Lenders do, however, provide restrictions as to the age and condition of the car you are trying to buy.
Unsecured - This comes in the form of a personal loan where you use the proceeds to buy a car.
Other things to consider when applying for a student car loan
Aside from the repayments and interest rate you should also take into consideration the following and make sure these are factored in in your budget
Car registration expenses
Insurance (usually mandatory)
Delivery charge if you're buying a new car
Regular maintenance costs
Optional: Extended Warranty
18 years or older
Car age and condition if you are buying a used car.
Compare Student Car Loans Before Signing the Dotted Line
Interest rates - Interest rates vary from lender to lender and are usually higher if you are buying a used car. This process may take some time but is way better than missing out on a better deal.
Fees, fees, and fees - There are many fees that you need to be aware of like pre-termination fees, late payment fees, loan management fees, etc... These are usually on the fine print and are not openly discussed unless you ask so make sure to read and ask all the questions that could affect your finances.
Features and Flexibility - This is usually in terms of your repayment structure. Can you pay the loan early? Can you pay more than your monthly dues if you have extra money? Do you get discounts if you pay early and pay more? Etc...
Due diligence is important when looking for car financing especially for students. You don't want to miss out on a better deal just because you were hurrying or failed to compare as many deals.
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