The student life has its ups and downs. On the one hand, there is a level of independence and free spirit that is as exciting as any other point in your life, and you’re continually learning about yourself and the wider world.
On the other hand, between the costs associated with studying, and an increase in personal living expenses, it can be difficult for many students to make ends meet, particularly if they are not working or don’t have much time to pick up hours at their workplace.
However, just because you haven’t got a credit history as yet, that doesn’t mean you are shut off from the loan market. In fact, provided you are an Australian citizen or permanent resident 18 years or older, you can still get a student car loan, but it pays to know how to navigate this process. In fact, international students with valid visas may also be eligible. Let’s take a closer look at how it all works.
How does a student car loan operate?
On the face of it, a student car loan is just like any other form of car loan, providing you with the funds to pick up a new or second-hand car. There will be the option of fixed or variable interest rates, as well as fees associated with your application, maintenance of the loan, and potentially, early repayments.
In most instances, however, the financier will limit the extent of credit they are willing to provide, because there is a greater risk of default for students considering their limited means for income and non-existent credit history. This means that students will often have just $15,000 to $20,000 at their disposal, which in turn limits your selection of cars in the marketplace.
As with any other instance where you might be forking out for a big purchase, the more money you can set aside, the smaller the amount of funds you borrow from a financier.
What conditions are associated with a student car loan?
Usually, student car loans will require that the vehicle is put up as collateral against the loan. This offers the financier some form of protection in the event that you default on the loan, so make sure you are aware of this condition before agreeing to any loan.
If a financier allows you to take out a loan without any collateral, referred to as an unsecured loan, then you should be prepared for a significantly higher interest rate attached to the loan.
The term of the loan is often fixed between 1 to 7 years, providing students with some flexibility to pay off the vehicle as their own financial circumstances develop. If you are more likely to enter the workforce in the near-term, a shorter term could be more advantageous, but you also shouldn’t put yourself in a position where you might be vulnerable if you were to lose your job. Always plan for a wide range of considerations.
The Fincar team is here to help you with all your financing needs. Contact us today to help arrange your next car or equipment loan.