There are number of reasons why students may want to get a car whilst at university! Whether you’re travelling to and from lectures, visiting your friends and family or commuting to a placement or part time job, having a car can be really beneficial! There are a number of things you should consider about getting student car finance and also what your chances are of approval. Whilst it’s not impossible, there are a number of ways in which you can help to increase your approval rate.
Challenges students could face getting a car on finance:
Any type of car finance deal is all about the risk for the lender. The lender takes a risk by loaning out money for consumers to get a car and evaluates the likelihood that they will get the money back. For each application, lenders take into account things like credit history, affordability, deposit contribution and employment status. Car finance for students could be affected by the following:
Before you apply for any type of loan, you should work out your affordability. Full time students don’t have the time to also have a fulltime job. If you don’t have a steady income, lenders may worry that you won’t be able to pay back your car finance on time and in full.
Having a deposit to put down for finance can help to reduce how much you are looking to borrow from a finance lender. However, it can be hard to save up a lump sum amount when you are a student.
If you’ve never taken out finance in the past, you could find yourself with a low credit score due to no credit history. Your credit score is based on your lending habits and many young people or first-time drivers have a lack of credit history to show.
How to improve your chances of getting approved:
Many lenders work to help as many people as possible get accepted for car finance. However, car finance is never guaranteed to anyone and there are a few ways in which you can improve your chances of getting a car loan as a student.
1. Increase your credit score
Your credit score shows lenders how good you are at making repayments and the likelihood you will pay your loan back. You can still get poor credit car finance but you can save money and get better rates with a good credit score. You can help to increase your score by reducing any current debt you have, build a credit history, make payments on time and in full and keep your credit usage low.
2. Build a credit history
As mentioned above, having a good credit history to show can improve your chances of getting approved and also lower your interest rate offered. Building a credit history can be as easy as getting a mobile phone contract in your name and paying it off every month in full. You could also consider a credit building credit card which you can make small purchases on and then pay them back in full each month.
3. Save up for a deposit
It can be hard to save up for a deposit for finance when you’re a student but even a small deposit can help secure you finance. Putting more money in means you don’t have to borrow as much from a lender and can reduce your interest rate and monthly payments. This can save you money in the long run and make your payments more affordable.
4. Get a part time job
It can be hard to work and study at the same time but even a part time student job can help you to show reliable and steady income. Lenders usually ask you to pass an affordability check which lets them know how you plan to pay back your finance each month.
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