Just because you’re a student doesn’t mean you can’t get approved for a car loan. However, there are certain factors to consider before you start shopping around for car loans and cars.
What’s your credit status?
When you apply for credit, credit providers will usually check your credit status before deciding whether to lend to you. Recent changes to credit reporting in Australia now mean your credit file holds much more information about you – which helps lenders determine your potential risk.
If you have credit in your name, such as a credit card, another loan, or a mobile phone contract, this information would be included on your credit file. If you have always made repayments on time and treated your credit responsibly, lenders may look on your application more favourably.
However, if you have defaults or missed payments in your name, lenders may think of you as high risk – which could mean your application gets denied. Apply for a copy of your credit file before applying for a car loan, and have any errors corrected. If you have poor credit history, you may want to improve your credit before applying for another loan.
Do you have a job?
Credit providers usually prefer to lend to applicants who have the means to repay them – and that usually means having a job. Even if you only have a part time job, this may be enough to get a lender to offer you a car loan.
How much do you want to borrow?
If you are a student, if you’re credit’s not that great and you don’t earn much from your job, it may be easier to get approved for a car loan if you only ask for a small amount. Try to choose an affordable car so you can apply for an affordable loan.
To work out what’s affordable, try using a car loan calculator to work out a monthly repayment schedule that fits your budget. You may also want to consider choosing a secured car loan to reduce the potential risk and increase your chances of getting approved.
Do you have a guarantor?
A guarantor is someone who is willing to take joint legal and financial responsibility on your loan. Although you will be the one that repays the loan, the guarantor is basically backing you in case something goes wrong.
If you are unable to repay the loan, the responsibility will fall to your guarantor to pay it off – so make sure you can afford the loan before you apply. The lender will usually look more favourably on this type of application as it is lower risk.