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Car loans for students – Get around easily in between classes
There’s often a universal overlap between being a student and existing on a shoestring budget. If this financial pickle is affecting your ability to buy a new set of wheels, read our guide to find out about car loans for students in Australia and how you can benefit.
How do student car loans work?
When you receive a car loan, you get extra cash at your fingertips, which you can then splash on a new or used vehicle. Before you enter into this arrangement with a lender, you should know what’s involved in the mix.
- How much do you borrow? – The lender can typically sort you out for any amount as long as you’re able to pay it back. They’ll usually look at your income or credit report to determine if you qualify for a specific loan amount.
- On what terms do you pay back the money? – Car loans are paid back in instalments over a set period. On average, crossing out your debt will take anywhere from one year to five or seven years.
- What’s the cost of student finance? – Keep in mind that along with buying a vehicle comes the cost of borrowing. Interest that gets added to your repayments plus other fees means you’ll end up paying more than the showroom price.
Can you use a student loan to buy a car?
Money from a student personal loan is used specifically to bankroll costs associated with higher education, such as tuition and accommodation. While nothing stops you from splurging the funds on a vehicle purchase, your studies should always pull rank over other secondary expenses, even one as convenient as a new ride.
Therefore, a student car loan is something you should only opt for if you’re sure you can afford it. BestFind’s student car loan calculator can help you work out your monthly repayments so you can make the best financial decision for yourself.
Where can you get car loans for students?
In Australia, your choice of lenders usually tallies up to the following:
- Banks and credit unions. Some banks and credit unions offer credit products that are custom-built for students. For instance, they might have fee waivers or more flexible loan terms. Although, you’ll likely need to open a student bank account or submit an official document as proof of your student status. However, most car loans are the garden variety type offered to any qualifying borrower, including non-students and permanent workers.
- Online lenders. Some lenders offer easy access to credit through online loan applications. This can be handy if you’re also on a strict time budget.
- Peer to peer companies. With P2P lending, you’ll be borrowing funds from private individuals, not banks or financial institutions. Many platforms offer these marketplace deals, and lending criteria and car loan features tend to vary slightly.
- Car dealerships. If you’re scouting for a cheap buy at a car dealership, you might be able to kill two birds with one stone. Dealer finance may require a deposit, but overall, you’ll hit the road much more quickly.
Types of car loans available for students
- Secured loans. Secured car loans are typically the norm when it comes to car finance. With this arrangement, the vehicle’s ownership can easily slide to the lender if you start slacking on your repayments. However, they’re usually an excellent option for students with a far from solid credit rating. That’s because you’re also more likely to be approved aside from getting a lower interest rate.
- Unsecured loans. You can also go for an unsecured car loan where your vehicle won’t be exposed to repossession by the lender. But, without collateral, the lender’s risk goes up – a cost that ends up inflating your interest bill.
- Fixed rate. If your car loan has a fixed interest rate, your repayments are set to stay the same. This generally protects you from the upward fluctuations of market rates while also blocking you off from the interest savings associated with downward fluctuations.
- Variable rate. A variable interest rate is one that can stray up or down throughout the repayment period. Your repayments and budget will also follow the same behaviour. This can be welcome if the rate goes down because the loan gets cheaper. But if the rate goes up, it means your budget just got tighter.
- Guarantor or joint application loans. Getting a guarantor or co-borrower can lend some serious weight to your application, especially if you have a shallow credit score. The guarantor or co-applicant, usually a guardian or close relative, uses their strong credit rating to vouch for you. This backup usually bags you a lower rate, but the guarantor has to spring for the repayments if you default. So you’ll have to do your best not to put them on the spot.
What’s the best way to compare car loans for students?
Bookmark the following factors and use them to streamline any future car loan comparisons:
- Interest rate. The fastest and quickest way to flatten borrowing costs is by hunting for the lowest rate available.
- Comparison rate. This percentage factors in interest plus standard charges. Always give it a look to avoid falling for lenders that advertise low rates while shifting the bulk of their charges to extra fees.
- Fees and charges. Also, get a breakdown of the exact charges and fees attached to the debt. You might find some “hidden” ones that haven’t been bundled into the comparison rate.
- Repayment flexibility. You can measure how flexible a loan is by whether you’ll be able to pay off the debt early without also paying an early repayment fee. You should also be able to pick your repayment schedule from the pool of weekly, fortnightly, or monthly choices.
- Other unique features. Besides just looking for cheap car loans for students, broaden your search to include additional features that improve your borrowing experience. These can be anything from redraw facilities (where you repocket extra repayments) and discounts to pre-approval and cheap, built-in insurance.
How to get a car loan as a student – Requirements
When applying for their financial products, most Australian lenders will generally require a clean credit history and a healthy credit score. You’ll also need to be at least 18 years old with a suitable source of income. Typically, Centrelink payments are accepted as a source of income, although the same may not apply for Austudy, Abstudy, Youth Allowance, and Newstart payments. It’s best to cross-check the credit provider’s requirements before applying to ensure you fit into their particular lending criteria.
Do you qualify for a student car loan as an international or exchange student?
You’ll find Australian citizenship or permanent residence listed as one of the top requirements for a car loan application. That means you might not qualify if you’re on a study visa or some other visa. However, always shop around for options and don’t hesitate to approach the lender directly and ask them to clear things for you.
Student car loans FAQ
How do I apply for a student car loan?
Compare student car loans using our product tables above, then click “Go to Site” once you decide to apply for the offer that best suits your needs. Next, submit your online application on the provider’s website.
How do I improve my credit score and my chances of approval?
Strengthening your credit score is mainly a matter of paying bills on time and avoiding too many applications.
What other costs should I consider when buying a car?
You might need to cover a deposit payment or factor in on-road costs such as stamp duty, registration fees, and insurance.
Are there any restrictions on the type of car I should buy?
If you’re buying a used car, the vehicle should generally not be older than 6 or 7 years old.
Are there any car loans for students with bad credit?
Some lenders offer small car loans for students, although these might have higher interest rates.
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