Lenders recognise that, although bad credit isn’t always an issue, a number of undergraduates don’t have an established credit history. For most people, it isn’t just the first time they’ve applied for a student car loan, it’s the first time they’ve ever lived away from the family home. A good credit history, affordability and the provision of a satisfactory down payment on car loans for students are critically important. A cosigner can also be used to reduce the cost of borrowing if repayments would otherwise be too high.
Affordable Auto Financing in College
The monthly repayments on a bad credit student car loan must be affordable to the customer. Improved affordability leads to a lower default rate because auto repayments are easier to maintain until the debt is completely cleared. If repayments are a struggle from the outset, the lender is likely to incur significant legal recovery costs in an attempt to get their money back. Financing an auto while in college with a secured loan and failing to keep up with the repayments will result in the repossession and sale of the vehicle.
Credit History for Car Loans for College
The higher the applicant’s score, the better the available deals on car loans for students. An improved credit score not only affects the cost of borrowing, it has a dramatic effect on the likelihood of approval. Although a low credit rating doesn’t preclude a college undergraduate from getting a auto loan, it will substantially increase the cost of borrowing. It’s important to take the right steps to get a better credit rating before applying for auto financing.
Deposits for Student Auto Loans
The provision of a reasonable deposit reduces the risk of financial loss the lender faces in the event of default. That said, most lenders will accept a far lower down payment – sometimes no deposit at all – because there is a recognition that most undergraduates don’t have any savings and tend to purchase less expensive vehicles. Several providers of auto financing for college students provide fast cash advance loans to fully or partially cover the deposit. If this option is taken, it is important to carefully consider how the balance will be cleared.
Cosigner Car Loans for Students and Undergraduates
In order to enjoy less expensive auto financing rates, it is necessary for college students to avoid poor credit and to have an established history. Although guaranteed bad credit car loans are available, the cost of borrowing is relatively high. A cosigner can secure a lower APR, provided that he or she has a good or excellent credit score. Should the repayments on a cosigned car loan ever be defaulted on by the student, the cosigner is then responsible for the debt. Due to this factor, the majority of cosigners are close family members.
Cheaper Student Car Loans
Don’t just settle for the first offer on the table. There are a number of established providers of car loans for students and they all have very different terms. Use a price comparison site or independent broker to trawl the market for the lowest student auto loan. If a guaranteed bad credit car loan has been taken out, always refinance after two years of punctual repayments. Credit scores usually get better over time so the cost of borrowing goes down as a result.