Just because you’re a student, it doesn’t mean you have to miss out on buying a car. As long as you have a steady source of income, a good credit history, and you meet the lending criteria, you should be able to get approved for a car loan as a student without too much trouble.
Know what the lender will look for
First up, you need to know what the lender will look for when you apply.
• Creditworthiness: Before providing you with a car loan, the lender needs to know you are not a risk. The lender will do this by checking how responsible you have been when dealing with credit in the past. First stop: your credit report.
• Income: Obviously, you will need to be able to repay the loan after buying your car. Which is why the lender will likely require you to have a steady source of income, either from a casual or part-time job. It’s worth noting that many lenders do not accept Newstart, Austudy or Youth Allowance as sources of income.
• Assets: If you have any assets in your name, this can look good in in the eyes of the lender. A borrower with assets is typically deemed lower risk, while income-producing assets may be rated even higher.
• Outgoings & Debts: After checking out how much you’re bringing in, the lender will want to know how much is going out. The basic idea behind doing this is so that the lender can check whether adding loan repayments to your outgoings will cause you financial stress.
• Residency Status: Most lenders typically only provide car loans to Australian citizens and permanent residents. This can make it harder for international students to get approved – but, it’s not impossible.
• Age: To apply for a car loan in Australia, you must be at least 18 years old. Bear in mind, some lenders may place lending limits on loans for applicants aged between 18 and 21.
Improve your chances of being approved
Keeping all of that in mind, now let’s look at how you can improve your chances of being approved for a car loan as a student here in Australia.
• Opt for a secured car loan: A secured car loan is usually easier to get approved for because the loan is secured against collateral (typically the car being purchased).
• Choose the right lender: Certain lenders will be more likely to approve students applying for a car loan, so be sure to choose a lender that offers the right fit.
• Build your credit score: If your credit score is not that great, you may want to take time to build it up before you apply for that car loan. Paying bills on time, such as your electricity bill and mobile phone account can help with this.
• Ensure your income is steady: Avoid jumping around the job market. Lenders want to know you can stick at a job and repay your loan. If you have been in the same steady role for at least a year, this will make you look more appealing to lenders.
• Opt for an affordable loan amount: Start by creating a budget of all your incomings and outgoings. From there, work out how much you can afford to repay on your car loan each month. Be sure to factor in any extra costs associated with running a car, and only apply for a loan you can actually afford to pay back.
• Save up a deposit: The larger your deposit, the less you will have to borrow on your car loan. This should make your repayments more affordable, while also reducing the amount you pay back in interest. Showing you can save also looks great with potential lenders.
• Go guarantor: A guarantor can ‘guarantee’ your car loan, making it easier for you to get approved. Check out this blog post to find out all you need to know about guarantor car loans.
Ready to apply? Reach out to our team at Car Loan World to find out how we could pair you with the perfect car loan for your needs.