How To Finance A Car As A College Student? Complete Guide
If you’re a college student and looking for a car loan with low interest rate. Then you’re on the right place. Finding right place to get car loan with low interest rates is important to keep costs manageable.
These days many lenders offer student car loans online even if you don’t have a job. The process is simple and hassle-free.
To apply for Best Low Interest Auto Loans For Students, simply fill out an online application and let the experts handle the rest.
In order to increase your chances of qualifying for a car loan in 2025. You need to check if your college partners with any lenders offering student-focused loans.
Can a college student get a loan for a car?
College students can get car loan, although it may require meeting certain criteria such as having a cosigner, a stable income or a solid credit history. Many lenders including credit unions and banks offer student-friendly loan options.
However, in a tough market, finding an affordable car loan can be challenging especially for students who often lack financial stability and a solid credit history.
So, You can also improve your application by finding someone willing to be your cosigner. These steps can make it easier to secure the car loan you need while still in your institute.
Read more: The Best First Time Car Buyer Program With Bad Credit
Where to Find Car Loans for Students?
Getting a car loan as a student can be tough, but there are many options to explore. Here’s a simple guide to help you find the right one:
1. Start with Your School
Some schools partner with financial institutions to offer special loan options for students. For example, USC Credit Union partners with the University of Southern California. It allows for enrolled students to become members and access financial products like auto loans.
Check with your school to see if they have similar partnerships that could offer lower rates or better terms.
2. Banks and Credit Unions
Many banks and credit unions have student-focused auto loan programs. For instance, Provident Credit Union offers college auto loans with flexible eligibility, such as low or no credit score requirements.
Credit unions often provide the lowest interest rates for auto loans. According to the Credit Union National Association (CUNA), the median interest rate for a $35,000 six-year car loan from a credit union is 10.12% for borrowers with poor credit, compared to 16.89% at banks.
3. Dealerships and Manufacturer Programs
Vehicle manufacturers sometimes offer car-buying deals specifically for students and recent graduates. While these deals may only apply to certain models, they can be a great way to save.
Here are a few examples:
- GM College Appreciation: $450 off certain new Chevrolet vehicles for current students or recent graduates (within two years). Spouses may also qualify.
- Ford College Student Purchase Program: Up to $700 bonus cash for leases or $600 for purchases on select 2023 and 2024 models.
- Honda Financial Services: $550 toward a down payment or purchase cost on eligible vehicles for students graduating within six months or who graduated in the last two years.
- Kia Happy First Time Buyer Program: Loans for new and used vehicles with no credit or down payment required. However, you must have a monthly income of at least $2,100.
Pro Tip:
When searching for a car loan, check multiple options to compare interest rates, terms, and eligibility requirements.
You can also improve your chances of approval by finding a cosigner or building your credit before applying. With the right strategy, you can secure a loan that fits your budget and needs as a student.
What to Know About Student Car Loans
Getting a car loan as a student can be a big financial decision, especially with limited resources. Here’s what you need to know to make a smart choice:
How Student Car Loans Work
When you take out a car loan, you borrow money to buy a car and repay it over time in fixed monthly payments, including interest. The length of your loan (the term) impacts your costs:
- Shorter terms: Higher monthly payments but less interest overall.
- Longer terms: Lower monthly payments but more interest in the long run.
Unlike student loans, car loans are secured by the vehicle itself. If you miss payments, the lender can repossess the car.
Can You Use Student Loans to Buy a Car?
Technically, most student loans don’t allow you to use the funds to purchase a car. Even if you could, it’s not a good idea.
Student loans typically take 10 to 20 years to repay, meaning you’d still be paying for a car long after you stop using it.
Common Challenges for Students Getting Car Loans
- Limited Credit History
As a student, you may not have much credit experience, which can make it harder to qualify for a loan with favorable terms. Most lenders look for at least some credit activity in the past six months. Without that, you may need to start building credit or find a cosigner.
- Limited Income
Lenders consider your income to decide if you can afford the monthly payments. If your car payment and other debts take up more than 50% of your monthly income before taxes, you could have trouble getting approved. - Higher Interest Rates
Students with no credit or lower scores often face higher interest rates. For example:
- The average interest rate for a car loan might be around 8.15%.
- For someone with lower credit (scores between 501 and 600), it could jump to 12.10%.
Higher rates can significantly increase the cost of your loan. For instance:
- On a $20,000 loan with a five-year term at 8.15% APR, you’d pay about $4,432 in interest.
- At 12.10%, the interest jumps to $6,728, costing you over $2,000 more.
- Down Payments
Although it’s common advice to put down 20% of the car’s price, many lenders offer loans with little to no down payment. However, saving up for a larger down payment can increase your chances of approval and may lower your interest rate. - Rising Car Payments
Car payments have gone up in recent years. On average:
- A used car loan in late 2023 had a monthly payment of $549.
- For new cars, the average payment was $715.
By comparison, in 2022, the average monthly payment for a used car was $470 and $632 for a new car.
Pro Tips for Students
- Check if your school partners with financial institutions offering student-focused car loans.
- Build your credit by responsibly using a credit card or paying off small loans.
- Consider finding a cosigner to help you qualify for better terms.
- Save for a down payment to reduce your loan amount and interest costs.
How to Improve Your Chances of Getting a Student Car Loan?
If you’re willing to compare different lenders and stay flexible about the car you choose, you can increase your chances of securing a better car loan. Here are some strategies students can use to qualify for more favorable loan terms.
| Tip | Description |
|---|---|
| 1. Consider a Cosigner | A cosigner is someone who agrees to take responsibility for your loan if you can’t make the payments. Having a cosigner with good credit can increase your chances of getting approved. |
| 2. Build Your Credit | Improving your credit score can help you qualify for better loans. Steps include: – Get a free credit report and dispute any errors. – Ask a family member with good credit to add you as an authorized user. – Request a higher credit limit on your current card if your score has improved. – Pay down your credit card balances. – Consider applying for a student credit card if you have no credit. |
| 3. Save for a Larger Down Payment | A larger down payment reduces the amount you need to borrow, leading to lower monthly payments and less interest paid. It can also increase your chances of loan approval. |
| 4. Choose a Cheaper Car | Choosing a less expensive car can lower your loan amount and monthly payments. Even older cars can be reliable if they’re well maintained. Look for a car that fits your budget. |
| 5. Look for Discounts | Check for discounts from lenders, dealerships, or car manufacturers to make your loan more affordable. Some offer student discounts, rate reductions for good grades, or lower rates for automatic payments. |
FAQ’s
Q1. Can a cosigner help me get approved for a student car loan?
Yes, having a cosigner can increase your chances of getting approved for a car loan. A cosigner is someone who agrees to take responsibility for the loan if you can’t make the payments. If the cosigner has good credit, it can help you qualify for better loan terms.
Q2. How can I improve my credit score to get a better car loan?
To improve your credit score, you can start by checking your credit report for mistakes and disputing any errors. You can also ask someone with good credit to add you as an authorized user on their credit card. Paying down credit card balances and asking for a higher credit limit can also help improve your score over time.
Q3. Do I need to make a large down payment to get approved for a student car loan?
A larger down payment can make it easier to get approved for a car loan. It lowers the amount you need to borrow, which can lead to smaller monthly payments and less interest over time. If you saving up for a larger down payment is a good way to improve your chances of approval.
Q4. Which bank gives lowest interest rate on car loan?
The interest rate on car loans can vary depending on factors like your credit score and loan term. In the U.S., competitive rates include 5.49% APR from LightStream (up to 7 years), 6.29% APR from Bank of America (up to 6 years), 6.99% APR from Wells Fargo (up to 7 years), and 4.29% APR from PenFed Credit Union for used cars (3.79% for new cars, both up to 7 years). It’s essential to compare offers from different banks and credit unions, and look for potential discounts for students or first-time car buyers to find the best deal.