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Understanding Car Finance for Students

April 21, 2016

Think you can’t get car finance if you’re a student? Think again! As long as you’ve got a valid driving licence and have enough income to keep up with repayments, student car finance can be a reality – regardless of whether or not you’ve got a deposit saved.

That being said, finding a lender willing to approve your finance application can be more challenging if you’re a student. This isn’t specifically tied to your student status, but rather a set of financial circumstances commonly associated with young drivers. More mature students with an established income and credit history may find they have no problem finding car finance.
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Today, we’re breaking down the barriers to car finance for young drivers – arming you with all the information you’ll need to get behind the wheel during your studies.

Can I get student car finance if I have no credit history?

A non-existent credit history is something which affects a lot of young people and can limit your access to the best car deals for young drivers. However, there are some simple steps you can take to demonstrate to lenders that you’re responsible when it comes to credit – improving your credit score over time, making you a lower risk applicant (in the eyes of lenders) and giving you access to more competitive interest rates on money borrowed.

Car finance for students with bad credit

If you’ve gotten into financial hot water in the past, you may have a black mark on your credit history – something which can, unfortunately, affect your lending potential. From unpaid store cards to missed bills, there are a number of reasons young people might have ended up on the financial naughty step. At The Car Loan Warehouse, we’re interested in what you can afford now – rather than focusing on your financial history – so regardless of your credit score, we should be able to arrange car finance for students with bad credit scores. Click here to read more about bad credit car finance.

Top tips for building and improving your credit history

  • A phone contract can be a great way to build some credit activity in your name – so make sure your phone contract is in your name (rather than your mum’s!), with monthly bills coming out of your account
  • Many banks offer student credit cards, which give you the opportunity to show that you can borrow and repay money in a timely manner. These cards tend to have a lower credit limit to protect you from getting into serious debt – however, as with any forms of lending, you should be sure you’re responsible enough to use it sensibly and can afford to repay any bills or interest you may incur
  • Make sure you’re registered on the electoral roll. Lenders use this information to confirm your identity and home address – and it’s an easy way to increase your chances of approval

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Do I need a deposit?

Saving for a deposit reduces the amount you’re borrowing and puts you in a better position to get approved, so save what you can if you’re planning ahead. That being said, there are plenty of options when it comes to car loans for students which don’t require a deposit – so don’t let your lack of savings hold you back from applying.

Do I need to be employed to get approved?

While a steady income will undoubtedly support your application, we understand it can be a bit of a chicken or egg situation – whereby you need a car to go to work, but can’t get one without a job. Many mainstream banks will require you to have been in continuous employment for a minimum of three months in order to consider your car finance application. However, at The Car Loan Warehouse, we understand that not all students have the time to work – while some may simply not have found a job yet.

If you’re an unemployed student, you may be eligible for a ‘guarantor loan’ – whereby a member of your family or a trusted friend will co-sign the loan for you, making them responsible for paying the balance (should you fail to keep up with repayments).

Try our car finance calculator for an instant estimate of what your monthly repayments could look like.

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Give our friendly team a call on 0800 066 2888 to discuss whether a guarantor loan could be the best option for you.

What if I work part-time?

It’s highly unlikely that you’re going to have time to study and hold down a full-time job as a student – hence why many students opt for part-time, weekend jobs to boost their disposable income. Luckily, any form of paid employment is going to improve your access to the best car deals for young drivers – and as long as you’re able to afford the repayments on your loan, we should be able to help you.

Best cars for students

When it comes to the best cars for young drivers, it’s all about value for money. Luckily, there are some fantastic superminis on the market – offering excellent fuel economy, low tax rates and affordable insurance.

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It’s important to remember that you’ll need to factor in running costs when working out how much you can afford to repay every month. On top of your finance repayments, you’ll need to count fuel, tax and insurance costs – leaving enough spare cash for any servicing or maintenance which may pop up while you’re at university. When applying for student car finance with The Car Loan Warehouse, you’re not limited to putting your loan towards your car – and, if necessary, you can borrow more and use the extra cash to put towards your insurance and running costs. That way, your loan can get you on the road even faster!

You should give some thought to whether you’re planning to buy a new or used car too. If you’ve got the time to shop around, you can get some great deals on the used car market – however, you’re more likely to encounter maintenance costs with an older vehicle. Click here to check out what we believe are the best student cars available on the used market. If you’re lucky enough to be able to buy new, many cars come with extended warranty periods and are well worth seeking out – ensuring maintenance costs are kept to a minimum over the first few years of ownership.

Ready to apply? The Car Loan Warehouse works with a wide variety of lenders, meaning we have access to some of the best student car finance deals available. Give our friendly team a call on 0800 066 2888 to discuss your options – or apply today for a fast, free, no-obligation decision!

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About The Author

Jon Le Roux is co-founder and company director of The Car Loan Warehouse. Being a mad engineering and motorsport enthusiast, I spend more hours than is healthy, watching, reading or talking about cars, boats, motorbikes…..basically anything with an engine.