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Your Go-To Guide: Student Car Loans

May 27, 2020 8 minute read
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Your Go-To Guide: Student Car Loans

Looking for student car loans? 

Having a car can make your uni life far more convenient. The problem is, as a student, finding the money to pay for a car isn’t always easy. A student car loan can help you get access to funds that can help you buy a new or used car.

Before you take out a loan, make sure you look into:

  • How student car loans work,
  • The difference between a secured and unsecured student car loan,
  • Whether you’re eligible for a car loan,
  • What to look at when comparing car loans.

Find out below if you would be eligible for a car loan as a student, and what you should look out for when buying a car on a tight budget.

How do student car loans work?

A car loan is a sum of money that you borrow from a lender in order to finance a new or used vehicle. After borrowing money to cover all or some of the costs of purchasing the car, you will then have to repay the loan over your chosen period. Car loan terms usually range from two to seven years. 

On top of your car loan repayments, you will also be charged interest on the loan. Car loans typically have a fixed interest rate meaning the interest figure will not change over the term of your loan. 

What’s the difference between a secured and unsecured student car loan?

When taking out a car loan, most lenders will require you to secure your loan with the car you are purchasing. This is referred to as a secured loan. Lenders use this as a type of insurance if you’re unable to repay the loan. If you’re unable to afford the repayments on the loan for whatever reason, your lender has the option to repossess your vehicle. However, this is generally only done as a last resort.

There may be restrictions on what can be used as security on a car loan. Your lender may not offer secured loans for second-hand or older cars. Make sure you check what the lenders’ limit is in terms of car age. Some lenders have a cutoff of 2 years, while others go up to around 10 years. The age of the car is usually calculated at the time of settlement.

Unsecured loans, on the other hand, refer to a particular loan in which you won’t have to attach an asset to secure your loan. These loans are typically for smaller amounts because it’s less risky for the lender. Most car loans are unsecured loans. In some cases, you may be able to secure your loan with the car you’re purchasing. 

How do I know if I’m eligible for a car loan?

All car loan lenders will require you to meet certain eligibility criteria. To apply with for car loans with Jacaranda Finance you must: 

  • Be 18 years or older;
  • Be an Australian Citizen or Permanent Resident;
  • Be able to show regular income being paid into a personal bank account for at least 3 months;
  • Have an Australian drivers license;
  • Have an active email address and mobile number;
  • Have internet banking set up.

Keep in mind that other lenders may have additional lending criteria that you should look out for. If you’re unsure whether you’ll be approved, you’re welcome to apply and let us take a look. It can be hard to gauge eligibility over the phone without having a proper look at what you earn and how you spend. 

Am I still eligible if I’m an international or exchange student?

Unfortunately, you will most likely not be eligible for a student car loan with Jacaranda Finance as an international or exchange student in Australia. The majority of lenders in Australia will require their applicants, regardless of whether they’re a student or not, to be either an Australian citizen or Permanent Resident. If you’re a student who’s studying in Australia via a study visa or any other type of visa, then it is highly unlikely that you’ll be eligible for a car loan. However, before applying, it’s always worth discussing your visa status with lenders directly to see if they have any products or options that you could consider.

Student car loans: how can you compare them?

Here are a few things that you should keep in mind when you’re comparing student car loans:

  • Interest rate: The interest rate that’s set by your lender will determine how much interest you will end up paying on your loan over its entire term. If you take out a secured student car loan, the interest rate will usually range between 6% and 10%. Unsecured student car loans will generally range between 8.5% and 17%. As you can tell, unsecured car loans are far more expensive compared to secured car loans, mainly for the extra risk involved.
  • Additional fees and charges: Almost all car loans, including student car loans, will have additional fees and charges that will most likely be paid through your repayments. It’s best to contact your lender before your first repayment and inquire about all the additional fees you’ll be expected to pay. These will affect your comparison rate, however, they will also help you get a real cost of the loan. All fees and charges should be stated in your loan contract before you commit to a loan. 
  • Repayment flexibility: As a student, managing your budget is vital. You wouldn’t want to have your bills unorganised. A lot of car loan lenders will give you flexibility with your repayments. Typically, however, your repayments will be aligned with your payday. The options are usually weekly, fortnightly, or monthly instalments depending on how often you get your pay. Depending on your lender, some will allow you to repay the loan early without any additional fees. However, it’s best to check with your lender as some may charge you an early settlement fee.
  • Additional features: The additional features may include having a redraw facility for early repayments, having pre-approval, or the ability to access your loan through an online management account.

I’m a student, how can I get a car loan?

If you’re a university student, you might have a part-time or casual job, meaning you could have a low income and limited credit history. Because of these factors, it could make taking out a student car loan difficult. However, there are a few ways you could improve your chances. Use the following tips to increase your chances of getting approved for a student car loan:

  • Build a credit history: If you build a good credit history, your chances of getting approved for a loan are much higher. Additionally, with a good credit history, you could get offered loans at better rates. Building a credit history isn’t difficult. All you need to do is pay all your existing bills on time and in full.
  • Save up for a deposit: Although you won’t necessarily need a deposit for a car loan, having one could improve your chances of getting approved. Without any credit history or a bad credit report, your lender could require you to put down a deposit. You could consider opening a high-interest savings account as that could help you earn interest on all your savings and, therefore, build a deposit. Some accounts will also have incentives that will encourage you to save your funds regularly and get awarded with more interest.
  • You could apply for a joint loan. If you don’t have any credit history, then applying for a joint loan could be worth looking into. 

How can I apply for a student car loan

After finding the right car for you, do some comparisons to find the car loan that best suits your needs. It’s vital to compare and understand all loan options and eligibility criteria.

  • Compare all your loan options: When taking out a loan, you will have to decide between taking out a secured or unsecured student car loan. You will also need to compare different loans based on what their fees, rates, and features are.
  • The eligibility criteria: As mentioned before, it’s important to make sure you’re eligible for the loan you’re applying to. The main eligibility requirements by most lenders are that you have to be 18 years old, either an Australian Citizen or permanent resident, and you have a stable income.
  • Have all your documentation ready: When applying for a student car loan, make sure you have documents such as your ID (this could be your passport or driver’s license), bank statements, and any other documents required by your lender, ready to go.
  • Submit your application: Depending on who your lender is, you will either receive a response in minutes, hours, or days. Hold on tight, and wait for the results of your student car loan!

Jacaranda car loans

Jacaranda Finance provides car loans ranging from $5,000 to $35,000 with a repayment period of 2 and 5 years (depending on how much you apply for). We will always give you a fair go when assessing your application. It’s our opinion that your credit history is exactly that – history. We can look past a less than perfect credit score if we see that you’ve been responsible with money recently. 

Don’t hesitate, scroll up and apply today. You won’t be charged a processing fee if your application is unsuccessful.

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