If you’re a student in Canada, it's very likely that you rely on some form of transportation to get to campus every day. While public transportation works great for many students, it definitely has its shortcomings. If you’re a student with a vehicle, you’ll likely have a much easier time getting to class on time without wasting time waiting for a late bus or train. While buying a vehicle may seem too expensive to manage while paying for an education, many students can get approved for a car loan. Many students who are considering getting a car loan worry that their lack of credit history will prevent them from being approved. This is mostly untrue but your lack of credit history may have you paying at a higher interest rate or requiring a larger down payment. In this article, we’re going to cover everything you need to know about getting a car loan as a student.
The Basics of Car Loans for Students in Canada
As a student, outside of your student loans, this is probably your first time getting a loan on a physical asset. Therefore, there are probably a few basic things you don’t know that you need to know. Here are a few basics of car loans:
- When you get a car loan, you’re borrowing a set amount of money that enables you to afford the purchase price of the vehicle. You’re required to repay that amount in a set period of time while paying an interest rate on the loan.
- Typically, the longer your loan term, the smaller your payments will be. Although longer loan terms often mean paying more in interest. Try and find a balance so you’re payments are manageable and you’re not paying a fortune in interest.
- Your credit score will dictate the car loan terms you’re approved for. The better your credit score, the better terms you’ll get on your loan.
5 Tips to Get a Student Car Loan
1. Work at Improving Your Credit Score
The biggest factor lenders look at when they're considering your application for a car loan is your credit score. As we’ve said many times, most people are eligible for a car loan regardless of their credit score, but a better credit score will likely result in better loan terms that could save you money. So for you to improve your credit score be sure to pay all of your bills consistently and on time. You could also use a credit card for all of your groceries and then immediately pay it off to keep your credit profile active.
2. Work on your Income
The other factor lenders look at while considering you for a loan is your income. If they don’t have confidence that you’re bringing in enough income to repay your loan, it will be hard for them to approve you, and if they do, it’ll likely come with a hefty interest rate. While it’s not expected that you hold a full-time job as a student, having a part-time job is a great way to prove to lenders that you’ll have no problem making your car payments.
3. Make a Down Payment
Making a down payment can save you a ton of money on interest so it’s important that you try and save up for a down payment before buying a car. Not only will making a down payment lower your monthly payments, but it also mean’s you’re borrowing less which often results in lower interest rates. If you’re able to, put a small amount of each of your paycheques away for a few months before you decide to buy a car so you can make a decent sized down payment.
4. Consider Getting a Co-Signer
If you’re worried about getting approved for a car loan, consider asking a close friend or family member to act as a co-signer on the loan. By co-signing on a loan, the person is essentially agreeing to take over the loan if you’re unable to pay it. DO NOT get a co-signer if you’re not confident in your ability to repay the loan as you will put your co-signer in a horrible position.
5. Get Pre-Approved with Car Loans Canada
One of the biggest mistakes Canadians make when buying a car is they apply for a car loan at multiple dealerships. These credit inquiries can actually hurt your credit score, furthering your chances of getting approved.
With Car Loans Canada, you can get approved for a car loan within 24 hours. We’ll look at your entire financial situation and find you a local dealership that will best suit your needs. Once you’ve been pre-approved, you’ll have a clear understanding of your budget so you’ll know exactly what vehicles are within your means.
The Documents Required
In order to get a car loan, these are a few documents you’ll need to present:
- If you’re working, you’ll want to bring 3 of your last pay stubs
- You must be over 18 to get a car loan so bring photo ID and a proof of address
- While you don’t need a drivers license to get a car loan, if you have one, bring it
- If you have a co-signer, he/she will need all the above documents as well