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Your Go-To Guide: Student Car Loans
May 27, 2020● 7 minute read●
Looking for student car loans?
Life at university can be more convenient with a car. Finding the money for a car as a student though isn’t always easy. A student car loan can help you get immediate access to funds to use for a new or used car.
We break down how student car loans work, the different types of student car loans, eligibility requirements, and how to apply for your loan.
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.
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. You will have to repay the loan over your chosen period of time. Car loan terms typically range from two to seven years.
On top of your car loan repayments, you will be charged interest on the loan. Car loans often 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. This is generally only done as a last resort but you should be aware that it is an option.
There may be restrictions on what can be used as security on a car loan. For example, 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 as it’s less risky for the lender. Most car loans are unsecured loans, but this can of course be affected by the value of the car.
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 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. Our process is 100% online and will give us all the necessary information to assess your student car loan application. Apply for a car loan online.
Am I still eligible if I’m an international or exchange student?
Unfortunately, international or exchange students are typically not eligible for car loans with Jacaranda Finance. 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. 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 are usually more expensive and will generally range between 8.5% and 17%.
- 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. 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. Many car loan lenders offer flexible repayment schedules. Typically, however, your repayments should be aligned with your payday. The options are usually weekly, fortnightly, or monthly instalments depending on how often you get your pay. Some lenders will allow you to repay the loan early without any additional fees. 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?
It is not uncommon for university students to have low income and limited credit history. This could make taking out a student car loan difficult. However, there are a few ways you could improve your chances. These are:
- 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 doesn’t have to be difficult. You should ensure you 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. 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. Some lenders may allow you to upload bank statements by logging into your bank account during the application process so there is less paperwork needed.
- 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 Finance may even be able to offer you a response within 60 minutes* if you apply during AEST business hours
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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