If you need to borrow money as a college student, you may have more limited options than if you had a full-time job with a steady income but you're not automatically disqualified. Some lenders have special programs for students, and there are other ways you might be able to qualify. However, most high school students can't qualify for a loan because they are legally minors. If you're under 18, you're legally not allowed to enter into a contract, including a car loan.
Programs through banks
Some lenders do offer special options for students who are looking to finance car loans, but may have additional qualifications for you to be eligible. For example, some lenders will look past the fact that you don't have much - if any - credit history, but will want to see that you are employed and have an income with which to pay off your loan. Also, some lenders may have a maximum amount that you can borrow under the student auto loan program. With that, you might also receive special perks like a lower interest rate or waived application fees, transaction fees or origination fees.
Programs through car manufacturers
Some car manufacturers also offer special programs for students and recent graduates. A number of manufacturers have special offers for students, especially those within six months of graduation. These programs offer perks like a discount off the sticker price and a reduced or no security deposit if leasing. In addition, you might be able to defer your first payment for a few months. But, if you're still in school you'll need a letter from your future employer stating you are going to be hired. However, you may be disqualified if you have negative information on your credit report, such as late payments or defaults.
Use a co-signer
If you don't qualify for a car loan on your own, a lender might think differently if you get a co-signer. A co-signer agrees to pay the loan if you don't, which reduces the risk for the lender because there's another person on the hook for the payments. Many people ask parents or other close relatives, but it's not a requirement that the co-signer be a family member.
Building credit early
If you plan on financing a car in the future, take steps to build your credit now. Having an existing credit report when you go to apply for a loan will increase your chances of approval a few years down the road. You can build credit by having a credit card, even if you pay it off in full every month. For example, if you're a freshman in college and know you'll want to buy a car around the time you graduate, apply for a credit card. That way, by your senior year you'll have three years of on-time payments (assuming you always pay by the due date) for a bank or manufacturer to see as you pursue a car loan. Plus, you can hopefully save up some cash for your down payment, further demonstrating your financial responsibility.
- Commerce Bank: Student Auto Loans
- Provident Credit Union: Provident College Student Programs
- Bankrate.com: How Can a Student Snag a Car Loan?
- BMW: College Graduate Program
- Acura: College Grad Program
- Autotrader.com: Preparing Your Children for Their First Car Loan
- Truecar.com: Car Deals and Discounts for College Graduates in 2016