How to get car finance when you’re a student
Having a car as a student can be really beneficial! You may rely on having a car to get you to and from lectures, come home to see family or to get to your part time job. Whatever your reason for wanting a car, car finance can be a great way to spread the cost! As a student, it can be a little harder to get approved for a car loan but there are a few ways in which you can increase your chances!
1. Check your credit score first
Having a low credit score can be one of the reasons why you may get declined for finance. If you don’t currently know what your credit score is, why not? You may just be starting out with credit or and haven’t had time to build a credit history which can result in a low credit score. You should get into the habit of checking your credit score regularly. When you do, you should make sure all your information is accurate and up to date. You should also take a look at the credit applications in your name and make sure you recognise them all or you could have been victim to a fraudulent application in your name.
2. Build your credit history
If you have little or no credit history, you may be wondering what your chances of approval are? Whilst you can get accepted for no credit car loans in many cases, it can be better to build credit before you start applying. Many students find themselves with low credit score when they haven’t taken out finance in the past, this is because lenders use your credit score to determine what type of lender you will be and with no evidence, it’s hard to predict. You can build credit by simply applying for a mobile phone contract and paying it off every month. You can also use a credit building credit card to make small purchases each month and pay them off on time and in full.
3. Have a regular income
If you’re a full-time student, you’ll not have a full-time job. However, many lenders like to see regular income to prove you would be able to pay back your car finance. Even having a part time job can be enough to pass financial affordability checks. You can also increase your chance of being approved by having a deposit to put towards your finance payments. A deposit shows that you are good with your money and means you don’t have to borrow as much from the lender. This can lower your monthly payments too!
4. Take out a joint car finance deal
In some cases, you could consider a joint car finance deal to help get you approved as a student. A joint car finance agreement is when two people apply for finance on the same vehicle and are both responsible for meeting the repayment deadline. You could ask a parent or family member to get a joint application with you to increase your chances of getting a car. A joint agreement means that both parties are legally responsible for meeting the repayment deadline and if you fail to do so, both your credit files can be affected.
5. Ask someone to be your guarantor
Guarantor car finance is different to a joint car finance deal. In a joint application, both parties are responsible for making repayments, but a guarantor deal is different. A guarantor is used to support your application and can be a family member, friend or even colleague. You are responsible for meeting the repayment deadline each month but if you fail to do so, your guarantor will be required to pay. Having a guarantor can increase your chances of getting approved for finance. However, missing your repayments can lead to County Court Judgements or defaults which seriously affect your chances of getting a loan or credit in the future.