automotive finance

Can You Apply for a Car Loan as a Student?

Just because you’re a student, it doesn’t mean you have to miss out on buying a car.As long as you have a stable source of income, a decent credit history, and meet the lending standards, you should be able to get approved for a car loan as a student with no difficulty.

What Lender to look for?

First and foremost, you must understand what the lender will be looking for when you apply.

• Creditworthiness: Before granting you a car loan, the lender must ensure that you are not a risk. The lender will do this by looking at how responsible you have been in the past while dealing with credit. The first stop should be your credit report.

• Earnings: Obviously, you must be able to repay the loan after purchasing your car. As a result, the lender will most likely expect you to have a stable source of income, such as a casual or part-time job. Many lenders will not accept Newstart, Austudy, or Youth Allowance as sources of income.

• Assets: If you have any assets in your name, it may look good to the lender. A borrower with assets is often regarded as lesser risk, whereas income-producing assets may be regarded as even greater risk.

• Outgoings & Debts: After determining how much you bring in, the lender will want to know how much you spend. The main concept is for the lender to determine whether adding loan repayments to your outgoings will cause you financial stress.

• Residency Status: Most lenders will only lend to Australian citizens or permanent residents. This may make it more difficult for overseas students to get accepted, but it is not impossible.

• Age: You must be at least 18 years old to apply for a car loan in Australia. Keep in mind that some lenders may impose lending limits on loans for applicants aged 18 to 21.

Can you get a car loan as a student?

The good news is that you can if you meet a lender’s approval criteria.

But not all lenders will approve student car loans. It’s a good idea to talk to a car finance broker to find out the lenders who will be more likely to approve your application.

Car finance for students

The main concern of any lender when you apply for a car loan is that you’ll make all your repayments on time. Standard car loan repayments are monthly. The more you need to borrow, the higher your monthly repayments will be (and vice versa).

Car loans for students with low income

If you’re a student, you’ll probably have a lot less regular income than someone who works full-time.  Lenders will want to see evidence of your regular income as part of your loan application. You should include your regular income from all sources in your application. These sources could include:

  • a part-time or casual job that you have (lenders will prefer a part-time job with stable income over a casual one where your income can fluctuate).
  • youth allowance if you’re aged under 24.
  • Austudy if you’re aged over 25.
  • ABSTUDY if you’re an Aboriginal or Torres Strait Islander student.

The more regular income you get, the more likely it is that you’ll be able to afford your car repayments (after taking care of all your other living expenses).

Lenders will also check your credit history as part of assessing your application. You probably don’t realise it, but if you’ve ever borrowed money or opened a credit account (like a credit card, a mobile phone account or an electricity account in your name), you’ll have a credit score.

Credit scores in Australia are compiled by credit reporting agencies. You get a good credit score by making all your credit repayments on time.

On the flip side, if you miss credit payments or make them late, your credit score goes down. It will also go down if you make too many unsuccessful credit or finance applications, or if you have multiple credit cards or you change your address regularly. Lenders like to see stability.

If you have a bad credit score, you’ll find it harder to get your car loan approved. If you are approved, the lender will probably charge you a higher interest rate.

Can a University student get a car loan with no job?

If you don’t have a job, your income is only likely to come from youth allowance, Austudy or ABSTUDY payments. This will make it more difficult for you to afford your repayments. Less lenders will be likely to approve your application. Some lenders won’t even count this income.

Talk to a car finance broker if you’re in this situation to find out which lenders will count this income and your options. One option may be to buy a cheaper vehicle so that your repayments will be lower and more affordable.

Another option could be to take out a car loan with a balloon payment at the end. This is a larger repayment at the end that lowers your regular repayments during the loan. A balloon payment could be feasible if you only have a year or two to finish your degree and you’ll be working full-time well before your balloon payment is due. That will give you time to budget for it.

Getting a car loan pre-approval can help you to know the price of the vehicle you can afford to buy before you start looking. This can save you a lot of time.

Car loans for international students in Australia

If you’re an international student on a student or temporary visa, it will be very difficult for you to get a car loan in Australia.

Students who are permanent residents or Australian citizens will find it easier to get car finance.

Is it smart to finance a car when you’re a student?

It’s a smart move to finance a car when you’re a student if you take out a loan that you can afford. It can make your life a lot easier. You’ll be able to get where you need to go, whether it be uni, part-time work or socialising, without having to rely on public transport or anyone else being available to take you.

Should I finance a car as a student?

There is no right or wrong answer to this question. Whether you should finance a vehicle depends on how badly you need a car and whether you can afford your repayments. If you can and you can find a lender to approve your loan, there’s no reason why you shouldn’t.

A car finance broker can help you to find a great deal. They work on behalf of vehicle  buyers, not sellers or dealers.

Other student car loan FAQs

Do I need a deposit?

This depends on the lender, but if you can provide one, it can increase your chances of being approved. That’s because it demonstrates to the lender that you can save money.

Another benefit of providing a deposit is that the more deposit you have, the less you need to borrow.

Will I need a guarantor?

Some lenders may require you to have a guarantor as a condition of approving your car loan. A guarantor is a person who agrees to become legally responsible for your loan repayments if you don’t make them. It’s usually a family member. Many students get their parents to be guarantors for their loans.

Lenders will almost always require you to have a guarantor if you have a bad credit history (or no credit history).

Can I take out a joint car loan?

A joint car loan can be an alternative to getting finance with a guarantor. The difference is that a joint loan involves you co-borrowing with a partner. You are both responsible for making the regular repayments, unlike a guarantor loan where the guarantor is only responsible if you don’t make the repayments.

A co-borrower can make it easier for you to jointly afford the repayments, even if that person is also a student.

What happens if I don’t make my student car loan repayments?

Most student car loans in Australia are secured loans. This means that the lender can legally repossess your vehicle and sell it if you (or your guarantor or co-borrower) don’t make your repayments. They will use the sales money to pay out your loan and give you any money (if any) left over.

What is the Personal Property Securities Register (PPSR)?

The PPSR is a government website where lenders can register their interest in personal property that’s bought using finance. If you take out a secured student car loan, the lender will register their interest in the vehicle on the PPSR.

Is it possible to get an unsecured student car loan?

It’s possible, but much more difficult. You’d almost certainly have to provide a guarantor. And if a lender did approve your application, you’d also be charged a much higher interest rate to cover them for the increased risk.

How long is a student car loan?

Car loan terms usually in Australia range from 1 to 7 years. If you take out a longer term for the same loan amount, the repayments will be lower and more affordable.

But it’s important to understand that lenders may restrict your loan term depending on the age of the vehicle you want to buy.

Are there any other student car loan fees besides interest?

This depends on the lender. Some will charge additional fees. Make sure you understand all the lender fees and charges before you agree to car finance, including any early repayment fees.

It’s best to talk to a broker who can try and find you a loan with low or no fees before you sign up for finance.

What is a comparison rate?

A comparison rate reflects the cost of loan interest plus any additional lender fees. It’s a legal requirement for lenders in Australia to advertise their comparison rates on their car loan (and other consumer) products. You can use the comparison rate to compare the real cost of different loan options.

Do you have to make monthly car loan repayments?

Some lenders will give you the option of weekly or fortnightly payments instead. It can help to make budgeting easier if you align your repayments with when you receive your regular income. Direct debit on that day can help to avoid any repayment hiccups or overspending.

What information do I need to provide when applying for a student car loan?

The requirements of different lenders vary, but most will usually ask you to provide:

  • proof of identity documents (such as a driver’s licence and Medicare card).
  • evidence of Australian citizenship or permanent residency.
  • proof of your regular income (e.g. pay slips or bank statements).
  • details of the vehicle you want to buy (if you’re not getting a pre-approval), such as year, make, model, engine number, registration number and price.

How long does it take to get a student car loan approved?

This depends on the lender and the quality of your application. Some lenders will approve good applications in as little as a few hours, while other will take much longer.

What is the maximum amount you can borrow for a student car loan?

This depends on the lender’s policy and how much you can afford to repay. Some lenders may also restrict the maximum amount you can borrow if you’re under 21 years old.

Can you get a student car loan if you’re under 18?

No, you have to be at least 18 to take out a vehicle loan in Australia.

Are there any other upfront costs when buying a car?

Governments around Australia charge stamp duty on vehicle purchases. If this cost isn’t already included in the purchase price, you’ll need to cater for it.

Besides the price of the car (and stamp duty), you’ll also need to factor in the cost insurance. Most lenders will require you to take out comprehensive vehicle insurance as a condition of approving your finance.

You might also have to pay registration costs not longer after you buy you car. If possible, try and find a vehicle with as must registration paid in advance as possible. If you want to buy car that has very little registration time left on it, use that as a negotiating point with the seller. Offer them a lower price to compensate for the registration fee that you’ll soon have to pay.

What are the ongoing costs of owning a car?

The main ongoing costs of owning a car are insurance, registration, petrol, and repairs and maintenance. You need to budget for these costs so that you can afford to pay them when they fall due.

Where can you find lenders for student car loans?

The quickest way to find lenders who offer student car loans is to talk to a vehicle finance broker. They arrange car loans for a living, so they know which lenders accept student loan applications. They also know the approval criteria of different lenders, so they can point you in the right direction.

Improve your chances of being approved

Keeping all of that in mind, now let’s look at how you can improve your chances of being approved for a car loan as a student here in Australia.

  • Opt for a secured car loan: A secured car loan is usually easier to get approved for because the loan is secured against collateral (typically the car being purchased).
  • Choose the right lender: Certain lenders will be more likely to approve students applying for a car loan, so be sure to choose a lender that offers the right fit.
  • Build your credit score: If your credit score is not that great, you may want to take time to build it up before you apply for that car loan. Paying bills on time, such as your electricity bill and mobile phone account can help with this.
  • Ensure your income is steady: Avoid jumping around the job market. Lenders want to know you can stick at a job and repay your loan. If you have been in the same steady role for at least a year, this will make you look more appealing to lenders.
  • Opt for an affordable loan amount: Start by creating a budget of all your incomings and outgoings. From there, work out how much you can afford to repay on your car loan each month. Be sure to factor in any extra costs associated with running a car, and only apply for a loan you can actually afford to pay back.
  • Save up a deposit: The larger your deposit, the less you will have to borrow on your car loan. This should make your repayments more affordable, while also reducing the amount you pay back in interest. Showing you can save also looks great with potential lenders.
  • Go guarantor: A guarantor can ‘guarantee’ your car loan, making it easier for you to get approved. Check out this blog post to find out all you need to know about guarantor car loans.

If you have any more questions or need further assistance, feel free to contact us. We’re here to help!


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