Good credit and a steady income is the key to approval for most car buyers. College students, however, may struggle with both. College students often struggle with poor credit, no income and bad credit.

Many lenders provide car loans to students. They may lend even to international students, recent college graduates and high school grads. As an alternative to having a great credit score, you might qualify by presenting a job or cosigner offer.

Student car loan basics

Most car loans have similar features. Monthly payments are made on car loans, or installments. The period of repayment is usually between two and six year.

If you are borrowing money for a long time, the interest rates and payments will be fixed. Your payment will be the same for the entire loan term. If you have a variable rate (which is rare), your interest rate and payment may change periodically, and sometimes even increase.

You could lose your vehicle if you don't make timely payments. Most auto loans have collateral (also called secured loans) and the vehicle is collateral.

Many lenders check your credit rating, employment record, and debts before approving you. Although it can be challenging for college students to meet the criteria, it isn't impossible — with the help of the right lender.

How to get a car loan for students

Many places offer loans, including credit unions, banks and online lenders. There are many different lenders, so you should compare their offers.

You can start by looking for lenders that offer student discounts. This could be in the form of rebates or discounts for existing customers. These are typically a lower rate on a loan.

Check to see if there is a credit card affiliated with your university, such as USC Credit Union. Check if your lender offers any First-Time Buyer programs, like those offered by PremierOne Credit Union. If you are able to co-apply or cosign, this could improve your chances for approval.

One option is to finance through a dealer. Dealer loans can be expensive, but they are limited to the cars sold by a particular dealer. There may also be no student rebates or discounts, although some dealers offer them to first-time buyers and students.

Students can benefit from car loans offered by dealers

Many automakers offer incentives to students who purchase new or used cars. Students and recent graduates can benefit from a range of rebates when they buy a brand-new (unused) car at authorised dealers or manufacturers. Consider these:

  • GM College Offer includes $500 in cash to buyers. Borrowers may be eligible to delay their first payment by up to ninety days.
  • Ford Drives U gives a $750 reward on purchases of Ford and Lincoln cars, and a $500 bonus for leasing. Students in high school, recent graduates and students at trade schools may be eligible.
  • Nissan USA College-Grad Deals provides $500 in cash to recent or soon-to-be graduates with proof of employment within 90 day.
  • Toyota College Grad Program offers $500 off the purchase or lease of a Toyota vehicle for recent graduates, as well as those who have recently graduated from a trade school, vocational school or nursing program. Qualifying requires proof that you are employed or have a job offered. Co-applicants can apply.

How to overcome difficulties in getting an auto loan as student

Unemployment or lack income

Lenders will often base their calculations on your income. If you have a low income, it may be difficult to get approved.

However, you can use one or more of these strategies to demonstrate that you are able to repay your loan.

  • Consider a cosigner

The cosigner will share in the loan payment responsibility with you. They can help you get approved by offering to risk their own money or credit.

  • You can extend your repayment period

Your monthly payment will decrease the longer you repay. While this option can help you be approved, it could also mean that you will end up paying more in fees and over-time interest.

  • Consider steady part-time work

Part-time work can be beneficial in many ways. A part-time job can be a great way to save money for the down payment. It will also cover your monthly payments. Some student car loan programs accept a job offer from an employer as proof of income in the future.

Interest rates

The lowest fees and rates are usually offered to applicants with excellent credit ratings and a stable income. In contrast, borrowers who have low credit scores or poor income are considered risky and may only be approved with high interest rate loans.

Here are some tips to help you reduce your rate:

  • Get good grades

Many lenders will not tell you that GPA or good grades can be used as alternative methods to qualify. So, sharing your grade may not get you a discount. It's worth asking, however, if the lender will consider your grades or GPA when making a loan decision.

  • Build credit

Credit ratings are a key factor in determining your eligibility for lower rates. Unfortunately, you can't build credit overnight. And for those with no history, it could take as long as six months before they start to see a rise in their scores.

Some lenders, however, may ease their credit requirements in order to make auto loans available to students. This is done by focusing more on the fact that they have a good credit rating. Consider having a member of your family add you as a user on one of their existing credit cards, or building a good payment record with a secured credit.

Auto loan interest rates

If you get a loan approved, it doesn't necessarily mean that the loan is affordable. Lenders can only determine your affordability by looking at a snapshot. They do not include additional expenses, like fuel, insurance or registration. Consider the following options if you are unable to get a loan at an affordable rate.

  • How to increase your deposit

It is possible to reduce your monthly payment by making a higher downpayment. In addition, you will save on interest and fees. You can borrow money from family members or partners to put down more cash, or you can take longer to save.

  • Cheaper cars are available

You can also reduce your monthly payment by financing a car that is less expensive. Well-maintained cars can provide you with the same reliability in transporting you to work or school. If or when you change your financial situation, it's always possible to upgrade.

The timing can be crucial. Some used cars are more expensive right now due to shortages of chips and low inventories. Comparing prices is important. You may also want to consider waiting if the current market conditions are too challenging.

  • Look for discounts

Shop around to find discounts. You can look out for the following discounts:

  1. Automatic payments. Setting up automatic loan payments could result in a rate reduction. Check the program requirements as you might need to have a bank account to qualify.
  2. Current Customer Discounts You may receive a special offer if you borrow money from a credit union or bank with which you have an existing "relationship," like a current account.
  3. Membership Discounts. Your lending institution may offer you a rate reduction if your purchase is made through their dealership.
  4. Services for buying a car. Credit unions may offer discounts if you buy a vehicle through their own service.

You can find out if these services are free and they will help you to schedule test drives and find vehicles that fit your budget.

You can also negotiate for a discount. To negotiate, you can get multiple preapprovals from lenders and ask them to beat any rates they have offered to you elsewhere.

Should you use the student loan to purchase a new vehicle?

Most lenders will restrict the way you use your loan. While student loans can be used to pay for transportation costs, they are not always restricted from being used as a vehicle.

A student loan is not the best way to get a new car. It's possible to claim that the car is needed to get to school. However, federal student loans aren't meant for vehicle purchases.

Auto loans and student loans have a longer repayment period. Even if you don't use the car anymore, you might still have to repay the loan.

International students: Five tips to help you find a car loan

If you can't use public transport, bike, walk, or carpool, then you might want to consider a loan. Some lenders offer loans to international students. They may, however, have special requirements.

Check out these things:

  1. Be sure to check the residency requirements. There are auto lenders that accept international student visas like F-1, OPT and H-1B. They also accept L-1, TN, O-1 and O-1.
  2. Pay attention to the length and frequency of the repayment. If the repayment period exceeds your legal stay, you won't get a loan.
  3. If you are having trouble qualifying, consider a lender who will cosign for you.
  4. Understanding credit requirements. The lender may not require a credit score or history but still want to check your credit file for negative marks, such as bankruptcy and debts in collection.
  5. Prequalification is a good idea. You can try getting prequalified.

Before you purchase a car, you will need to have a valid driver's licence and auto insurance.

There are online lenders that offer international student financing in addition to banks and credit unions. Check out these few:

  • Borrowers with green cards and visas can apply for loans. Graduate students and undergrads with GPAs of 3.0 or higher can apply. You don't even need a SSN or a credit rating.
  • StiltApply Online for a Loan with Up to Three Year Repayment. No cosigner is required.
  • Lendbuzz Your education, your employment history, your savings and earnings potential can determine if you qualify. Credit history, SSN or cosigner are not required. Terms range from 3 to 5 years.


  • owenbarrett

    I'm Owen Barrett, a 31-year-old educational blogger and traveler. I enjoy writing about the places I've visited and sharing educational content about travel and culture. When I'm not writing or traveling, I like spending time with my family and friends.