We understand that many students want to buy a car. You have likely only recently passed your driving test and want to begin your lifelong motoring journey. However, buying a car typically requires disposable income, and students tend to have notoriously little. Securing a loan can also be difficult for students as they’re regarded by most lenders as a credit risk due to their low/non-existent regular income. That being said, it is possible to secure loans from certain providers. You just need to make yourself a more viable option to lenders. Here’s our guide to car finance for students.
First, let’s establish the reasons why students find it difficult to secure car finance. As we’ve touched upon, most students lack significant disposable income and only just manage to make ends meet with student loans and/or assistance from family members. This fact doesn’t fill lenders with confidence that they’ll receive their monthly repayments on time, and as such, most lenders will dismiss students on this point alone.
Another reason students struggle is that they are unlikely to have a credit history, and with that, a potentially low credit score. Lenders need to see evidence of meeting loan repayments and a history of good money management, but since students have often never needed to take out credit in the past, there is no such evidence. Couple this with stereotypes surrounding youth and inexperience, and it’s no wonder why lenders are inclined to dismiss student credit applications.
It may seem like an uphill battle, but there are a number of steps that students can take to make themselves less of a credit risk and more attractive to lenders.
We know we just spoke about how little money students typically have, but hear us out. This is a longer-term approach that will prove you can be financially responsible and will reduce the amount you’ll need to borrow. It also shows that you’re taking your car finance seriously and you aren’t taking out a loan on a whim. This will mean that you won’t be able to apply and secure a loan immediately, but it greatly increases your chances of being accepted in the near future. If you are really serious about buying a car with credit, then we think it’ll be worth the wait.
We don’t mean to sound like your parents with this one, but getting a job is a seriously good idea. Aside from obviously giving you more disposable income with which to repay your loan, having a job, even just part-time, will boost your chances of securing car finance as a student. It shows responsibility and means you can provide more evidence of your financial situation. The more evidence you can provide, the better – lenders want to make the most informed decisions possible when deciding to whom they should lend.
For the best chance of being accepted for a car loan, it’s best to have a monthly income of £1200 or more per month. This can come from a combination of sources, including some state benefits such as disability allowance. As long as your monthly net income reaches £1200, you’ll be in an excellent position to receive car finance as a student.
A guarantor is a person who will pay your monthly loan repayments in the event that you are unable to. They act as insurance to a lender as they are guaranteed to receive their repayments, even if you as an individual struggle to meet the financial deadlines. As a result, lenders are more confident in you as a borrower and are more likely to offer you a loan, perhaps even with a better interest rate.
Your guarantor will need to be someone you trust, someone in a good financial position and be able to prove it with evidence. Ideally they will be in full-time employment and have an excellent credit score. Visit our guarantor car finance page for more information.
Here at Carfinanceplus.com, we specialise in helping people in difficult financial situations secure car finance. Our panel of lenders offers you the best chance of being accepted for a car loan. When assessing your application, we perform a ‘soft search’ of your credit history that will assess your likelihood of being accepted. Unlike a full credit check, this will not harm your credit score or your chances of securing finance in the future. It simply gives us an accurate account of your viability as a borrower so that we can advise you on the best course of action.
In some cases, we also offer finance to students who have a provisional licence. We believe that students should be able to buy a car while they’re still in the process of getting their full driver’s licence, which is why our panel of lenders consider those with a provisional licence. Check out our How It Works page for more information on our application process and what we look for in borrowers.
While we can never guarantee that anybody will be accepted for a loan, following the steps above will give you the best chances of securing car finance as a student. If you have any questions or would like more advice becoming attractive to lenders, get in touch with us today.View more from The Car Finance Hub