Inquire about the parameters of the financing deal.
Before going too far with a financing agreement, the borrower will need to know more about what he is buying.
- Decide on a new or used vehicle. Because of the high costs of buying a new vehicle on the dealer's lot, as well as insurance costs and other extras, many experts recommend buying a used vehicle for student financing deals. Most students will not be able to get approval for a new vehicle.
- Determine whether to utilize a dealer lot sale or private sale. Car shoppers can get much better deals in a private sale or sale by owner, but they will often assume more risk for existing conditions that can get worse over time.
- Think about gas efficiency. One of the future costs of the vehicle will occur at the pump. This is something to think about when considering a particular financing deal that will further stress an existing student income.
Look for specialized student car loan lenders.
Some lenders are willing to contemplate student car loans. Finding them can be difficult, since not all banks or established lenders have these kinds of products available.
- Research student car loans from manufacturers. Some auto manufacturers are providing school-age individuals or those returning to school with convenient factory-direct financing options.
- Talk to local banks about the student car loan products that they provide.
- Look for other informal lenders like credit unions, peer-to-peer lending or any other alternative that might help a student get a car loan with less stated income.
One of the biggest problems with many available student car loan products is that a lender simply shifts the cost of higher risk back to the borrower with extremely high interest rates. That leads to a student repaying an expensive debt that only gets more expensive over time.
- Take a look at existing market interest rates and make sure that the offered rate does not exceed the norm by too much.
Students and others with lower income may face specific issues with getting approved for a student car loan. Talk to the dealer or other lender and resolve these concerns as necessary.
- Think about using a cosigner. A cosigner is one alternative for a student car loan. However, it's important that the cosigner and the borrower both understand all of the obligations and responsibilities in the cosigner agreement.
- Offer a larger down payment. This strategy can sometimes secure approval for those to whom a lender is initially skittish.