Advertisements for college student car loans are abundant on the internet. They are largely a marketing ploy to attract college students to finance their vehicle purchase with their company. Students still must have adequate income to afford the payment and insurance. The interest rates are much higher than traditional rates at banks and credit unions because the financing carries a higher risk. Very often students have not yet established a credit history so it is difficult for them to obtain financing anywhere else. College students find themselves in a catch 22 situation. They need a car to get to work and they need work to get a car.
There are ways for to obtain a loan for a car besides the high interest sub-prime lenders that offer special student loans. It will take time and a little leg work, though. It also may require the student to settle for something less than a shiny new Mustang. Contact various dealerships and ask if they are offering special student incentives through the manufacturer. From time to time manufacturers will offer special rebates for students, or special financing for students. The cars are often the makes that have been slow sellers. This is a way for the manufacturer to boost sales and presence on the road. One such deal is by the manufacturer of the Scion. Students are offered a rebate of $1000 dollars and no payments for 90 days. The rebate can be used as the down payment. The manufacturer carries the note so they can be more flexible in their approvals and interest rate. It isn’t a Firebird or a Mustang, but it is a new vehicle that will provide several years of dependable driving.
Another way to obtain financing without paying high interest rates reserved for risky loans is by having a co-signer. The vehicle is actually financed in the student’s name, but the co-signer is stating that they will back the loan and pay the payments should the student default on the loan. The co-signer must have good to excellent credit or the loan will not be approved. Parents are often willing to co-sign for their children as it helps them to establish a credit history. The financial institutions with the lowest interest rates and the likelihood of offering a loan with a co-signer is a credit union.
Any lender is going to want to see proof of income and stability on a job. A Social Security number is needed so that the lender can run a credit check with the three major credit bureaus. Proof of insurance is another requirement. Lenders want to know that they are protected until the car is paid for. Before deciding on the car to purchase, a wise student will look at all the options and costs associated with purchasing a vehicle. Insurance rates can vary greatly from vehicle to vehicle. Having a bad case of the “I wants” could result in a future bad credit rating if you cannot afford the vehicle selected.