Can Students get Car Finance with a low-income?

By Geoff

Can I get car finance if I am a student?

Moving to Uni or College and need a car?
The transition from school to university or college is probably one of the biggest you’ll ever experience in your life and probably one of the most exciting.

For many young people, uni is a place away from home for the first time with the freedom that comes with it, meeting new friends and the creation of many great memories.

Student Driver Learning To Drive

However, starting university can also be a difficult transition. In many cases, you leave behind the familiar and confront the ‘new’ everything.

One of the most desirable things for a student away from home is owning a car. Freedom to go back and visit whenever needed, get a part-time job, or do a bigger shop!

But…how do you get a reliable car as a student if you don’t have loads of cash?

Most financial experts will agree – using a college or university student loan for car finance obligations can be challenging to justify to lenders. But it’s not impossible!

Read on to find out why getting car finance as a student can be challenging and how you might get around the problem.

Why are student car loans so notoriously tricky?

A successful application for car finance is all down to your credit history, income, and affordability.

It isn’t easy to get car finance as a student because most students are broke and don’t have a job!

Indeed, getting any finance as a student outside of your student loan is challenging.

For students between 18 to 21, a car loan in your name only may be more ambitious than for older students.

Typically, students over 21 are more likely to have a credit history and a better chance of making a successful application in their name only. But it certainly is not a slam dunk.

Does my credit score affect my getting student car finance?

Yes!. Your credit rating is essentially a view of how reliably you’ve met all of your past financial obligations.

Unfortunately, most relatively young students haven’t had previous financial loans, especially car finance!

So, a student without a credit history can make it hard for a credit broker to justify lending to them only in their name.

How can I build up my credit score as a student?

Focus on your credit history. It’s worth improving this as soon as possible. Even students can improve a credit score pretty quickly, and it’s really not hard to do.

Take out a student credit card. Use it for a grocery shop every month, set up a direct debit and pay in full. Your credit score will go up, and lenders will see you as more reliable.

If it isn’t already, make sure your mobile contract is in your name. Pay every month, and your score will prosper. However, don’t run over your minutes and put off paying it for six months…that will hammer your credit rating!

Keeping good money management can quickly improve your credit score and the likelihood of getting credit.

Do I need to be employed to get approved for a student car loan?

It’s highly likely that after all your essential outgoings, you won’t have sufficient surplus funding for car repayments each month plus the additional motoring costs.

Quite obviously, you need to increase your monthly income! You need a job!

A part-time job is okay because you’re studying. It’s the amount you earn that matters to the finance provider. You will have a better chance with a car finance application if you have a solid part-time job with your wages paid into your bank account.

Usually, the lender will want to see you at work for a decent time. Six months is the norm, showing that your income is reliable and consistent.

However, many lenders still won’t consider student car finance applications despite having a job, which can be frustrating.

But, don’t worry, some finance providers do lend to students.

Does my student loan count as income for car finance?

You might feel that you’re bringing in more than enough money to make a car payment with your student loan and cash from a part-time job.

Unfortunately, most lenders don’t consider your university loan an income: the loan is supposed to be for your tuition and living costs, not a car.

Student car finance with a guarantor?

As a mature student over 21, you might think you’ll be able to arrange a car finance deal without assistance.

However, even at 21, the odds are against you getting car finance with only your name on the agreement. And if you have a low income, it’s even more unlikely.

Students typically opt for a student car finance with a guarantor.

A guarantor loan is when a trusted person with a significant financial history (usually a parent or guardian) co-signs the agreement with you.

The ‘guarantor’ agrees to ‘guarantee’ to pay if you fail to make the repayments; they’re legally liable to pay. A guarantor car loan can be tricky, as you’ll need to find someone comfortable with signing this for you.

Will car finance get me a better car than paying outright?

You might have come to this article thinking, ‘Can I get car finance as a student?’

But why should you choose car finance anyway? Especially as it seems so complicated!

Student car finance allows you to make a monthly payment to get yourself in a decent car. It usually means you can afford something newer, safer and more reliable than purchasing an older car outright.

An older or high mileage vehicle might be in your budget, but it can be unreliable. Although the upfront cost of the car might be cheap and you may have saved. As a student, sinking a fortune into keeping the vehicle running is no joke.

If you decide to buy a car, speak to someone you trust, such as your parents, to see if they can help you out. Either by lending you some extra cash to buy a reasonable vehicle outright or supporting you with a guarantor or joint finance application.

Above all, If you’re driving a car, it must be safe and reliable.

Summary – think it through!

There are several benefits of car finance for students.

For one, it’ll help you build up that credit rating. A car finance deal will bolster your credit score and history if you reliably make your monthly payments.

Good credit history or credit score as a student can work in your favour in the future. When you decide to get on the property ladder, take out a personal loan or even a loan to start a business.

Having a good credit rating opens up so many doors as a way of helping to secure car finance.

Overall, student car finance deals can be the best way to get a reliable car:

  • You won’t have to use up all your savings
  • You’ll know the monthly payments to budget accordingly.

Of course, it goes without saying that you should make sure you can afford the finance.

Consider the summer months when that student loan goes dry: can you still make the monthly payment?

Also, think about talking to your parents or a loved one you trust and ask to review your budget. A second opinion is always worth getting!

Finally, do the right thing for you!

If you don’t have a reliable income: think carefully about whether a car is right for you at the minute, regardless of whether you’re considering student car finance or not.

Of course, if you have or can borrow the cash, you could buy something outright.

Remember, university is ultimately about investing in your future. Work hard, and you’ll have plenty of time for car loans later.

If you’re confident you can, go for it and secure a great car finance deal today, but make sure you get a car within your budget.