Student auto loans are the first step towards building good credit for young drivers. These first time car loans require no credit, but a cosigner will be needed to sign off on the loan. Although these types of loans aren’t usually the most low rate car loans around, there are quite a few steps that can be taken to lower rates and save money. These tips can help you, as a first time car buyer with no credit, find the best rates available to you for a car loan.
Student car loans offer reduced interest rates to students with a high grade point average, as they are considered more responsible and therefore less of a risk. If you currently have a high GPA (above 3.5) or are on the Dean’s List or Honor Roll, you have an excellent chance of finding a loan at an improved, lower rate. If your GPA is less than impressive but you feel you could perform better, you should consider the advantages of waiting to get a car in order to get better terms on a loan.
The credit history of your cosigner can have an impact on the rates you are able to secure, so you should find a cosigner with good credit if at all possible. Most students will simply use their parents, but if your parents’ credit score is poor, you may consider asking a grandparent or other relative with good credit to cosign on your loan for you.
Most students’ first car is a relatively inexpensive, used model that’s more about function than style. As a used car, it’s likely that this purchase will be replaced either when it breaks down or when the student has more money available to put towards a nicer car. With this in mind, you won’t want to be repaying the loan over a period of 7 years if you’ll only be using the car for 4. Although you will have to make larger payments in the short run, you’ll pay much less in interest and be in a much better position financially if you pay the loan off quickly.
The more money you can put down on a car, the less you’ll have to finance and the less interest you will be expected to pay. Making a large down payment might mean fewer fun activities for a while, but every little bit you can pay up front will save you money in the future. Lenders will consider you less of a risk if you are only financing a little money, and may be inclined to offer lower interest rates.
Student auto loans are a great way to begin building credit, assuming you can pay the money back as planned. To help you in this quest, follow these tips to find the best rates on your loan.