While it may be slightly more challenging than for individuals in stable, full-time employment, apprentices can also apply for and obtain car loans. Lenders assess various factors when considering loan applications, and apprenticeships are typically seen as a form of employment, albeit with some unique considerations.
These are some of the key factors to consider if you are an apprentice looking at applying for a car loan.
Income Stream
Firstly, most lenders will evaluate your income stability and repayment capacity. As an apprentice, your income is almost certain to be lower than that of fully qualified workers, which can influence the amount you are eligible to borrow.
However, regular income from your apprenticeship, combined with the potential for future earnings growth as you progress in your trade, can work in your favour. Providing evidence of a steady income through payslips and a history of consistent employment will strengthen your application.
Credit History
If you have a good credit score, it indicates to lenders that you are responsible with repayments and less risky for them to lend to. However, many apprentices may not have an extensive credit history, particularly if they are young or just starting their careers. In this case, you may still qualify for a loan, but it may come with higher interest rates or stricter conditions.
Specialty Financiers
Some lenders and car financing companies cater specifically to apprentices or younger applicants. These lenders might be more flexible in their requirements, considering factors such as your trade, the expected stability of your future career, and any additional income sources. For example, they may offer special loans for apprentices with lower deposit requirements or adjusted repayment terms.
How to Get Ahead
If you want to put your best foot forward, show your financial acumen courtesy of a deposit, or maintaining a budget to reassure lenders of your financial responsibility. A larger deposit reduces the loan-to-value ratio (LVR), which can make lenders more willing to approve your loan or offer better terms.
If you are struggling on that front, another option is to look for a guarantor. A guarantor, typically a parent or close relative, agrees to take responsibility for the loan if you are unable to meet repayments. This reduces the lender’s risk and can significantly increase your chances of approval. However, it’s important to understand the implications of this arrangement for both parties.
Lastly, budgeting and planning are crucial when applying for a car loan as an apprentice. Carefully consider the terms of the car loan, including the interest rate, repayment period, and associated fees. Use loan calculators to estimate your repayments and ensure that they are manageable within your budget.
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.