Owning a car adds an element of freedom to your life. Many students rely on the mobility of a car to get from home to uni and potentially to their part-time job. Relying on public transport can make attending lectures on time difficult and having a car can relieve you from the pressure of catching trains on time. However, you may not have the right funds handy to get yourself moving.
If that’s the case, read on to find out everything you need to know about car loans and how to get them!
A car loan is a form of personal loan, specifically designed to help you finance a car. You borrow a sum of money from a lender and repay it with additional interest over a certain amount of time.
The amount you can borrow and your interest rate are depending on a few factors: Your current credit history, your income, and additional requirements that may depend on your lender. Before getting a loan, you should think twice if taking on debt is advisable in your financial situation. You should only get a loan if you can afford to repay it comfortably.
Finding a suitable car loan as a student might require you to compare options and requirements for a while. Most banks, private lenders, and car dealers have specific loan options available for students. However, you may need to look into a few to find out more about their criteria.
Some lenders may offer special student car loans, in other cases, you may be eligible for a regular personal loan. If you don’t have a recorded employment history over the last few months and limited credit record, getting a loan with your bank may be a good idea. If you have been with them for a while, they have a track record of your financial behaviour.
While your credit history might not go back for years, you most likely have some evidence of your financial history accumulated already. Since you opened your first bank account, your financial decisions have been recorded and add to a rating that makes up your creditworthiness. Paying a phone contract on time regularly or using an online paid streaming service like Netflix may also add to your credit history. Everyone has the right to see their own and it may be sensible to take a look at yours to see if it includes any mistakes before you apply for a loan. You could try a tool like Tippla to find out what your credit score is and what’s been recorded on it.
It is highly important that you work out your income before you apply for student car loans. You should understand your budget and how much you can afford to repay. If you receive income from multiple sources (your parents, Government top-ups, scholarships, part-time work etc.), add it all up and take off any regular expenses you may have such as rent, bills, food, public transport, phone, and any entertainment costs you may have. You should also take into consideration that buying a car may come with additional costs such as insurance and registration.
You may also have to put down a deposit for the car you want. Therefore, you should make sure you have about 40% of the full amount saved before you purchase a car. Some lenders may cover a bigger percentage, however, it is advisable to cover at least parts of the purchase up front.
You may be wondering what the difference is. Banks and private lenders may offer you an option for a secured loan. That means you attach collateral as security to your application.
In most cases, you can use the car you purchase as security against your loan. This provides extra protection for your lender and sometimes enables them to offer you a better interest rate or a higher loan amount. However, if you miss payments, you may risk losing the car that you are using against your loan. In contrary, if you get an unsecured loan, you don’t have to provide any security against your loan.
Interest rates are another important factor to consider for student car loans. What interest rate a lender will offer can depend on your income, the repayment terms, and your current credit history.
A fixed interest rate ensures that your interest rate stays the same throughout the whole repayment terms. This may help you plan your finances better and you will know exactly how much money is taken off your account at what time. However, if you want to make extra repayments or pay your loan off early, you may face additional fees, depending on your lender.
A variable interest rate will fluctuate during the life of your loan but can provide more flexibility with repayments. You should read thoroughly into your loan terms before you agree to ensure you have a positive lending experience without hidden costs and extra fees.
Many lenders, unfortunately, can’t provide options for international students. It may pay off to do your research to find a suitable option for you. However, if you are studying in Australia on a different type of visa, there may be better options available to you. Your nationality may be another factor. Some lenders offer loan options for residents of New Zealand.
The main reason why it is tricky to find student car loans can be your limited credit history. Many lenders will use it as an indication of your payment habits. Additionally, you may not have a steady income while you are studying as you spend most of your time in uni and work during your semester breaks.
It may be hard to overcome these obstacles on your own. Therefore, it is not unusual to use a guarantor to get you a car loan approved. A family member or relative can take on the legal and financial responsibilities for your loan, in case you miss a payment or won’t be able to repay your loan at all. However, it is important that you discuss this idea with a suitable person first and make sure that you have the finances available to make your payments.
Otherwise, you may leave a relative with unpaid debt and lost trust in your commitments. It may also come with some additional paperwork, so make sure that you prepare yourself well for your application.
Getting a car is an exciting process, especially when you know it will make your life easier. But there are some additional costs that you shouldn’t forget about when you consider buying a car. Make sure to take them into the calculations when thinking if you can afford to get a car.
Depending on which state you are buying a car in, rego costs can vary. Costs are depending on your vehicle and how long you want to register it for.
It is mandatory in any Australian state to get compulsory third party insurance (CTP). There are other insurance options that you can book additionally if you want to protect yourself from damage to your car and high maintenance costs.
In some cases, your housing may come with a car parking space already, in others you can get a street permit or have to purchase an additional car parking space. It is sensible to look into your options beforehand, so you know what you are signing up for.
And of course, you never know when your car will break down, a small piece needs to be fixed or accident damage needs to be repaired. Cars can come with high and unexpected maintenance costs and you should make sure that you have the funds to keep your car on the road.
If you are after a good deal for student car loans, we may be able to help. Jacaranda offers car loans from $5,000 to $35,000 with repayment terms from 1 to 5 years. Finding the right student car loans might be a little overwhelming. We get it. That’s why we do the hard work for you. You tell us a little bit about yourself and we assess your financial situation in no time. If you submit your application during our business hours, we may provide you with an outcome within 60 minutes, easy and convenient.
Young entrepreneur Daniel Wessels is the CEO and Founder of Jacaranda Finance. Although only in his early thirties, Wessels’ determination and adaptability has led him to successfully pioneer a range of other enterprises both here and abroad.Read More
Jacaranda is 100% online. So, we do not accept applications over-the-phone. However, our friendly team is more than happy to answer any questions you may have.