Many types of loans are simply off limits to students because of their insufficient credit histories. You may have experienced rejection is you are a student who has applied for credit before and been turned down because you have no credit. It is a perplexing situation because no one will extend credit to you because you have no credit history, but you cannot build your credit history up because no one will give you the credit that you need (sort of a catch twenty-two).
Happily, a car loan is slightly different than many of the types of loans that are reliant solely upon your borrowing past to establish your creditworthiness. Many students find that getting the car loan they need is, in fact, a simple matter.Easy understanding Student Car LoansA car loan is basically a secured loan because the lender will place a lien against the car title until you have completely paid the car loan in full. For this reason, a student car loan is among the easiest types of loans to obtain. When a lender, lending institution, or finance company looks at your application for a loan of any type, they are attempting to discern the risk that they will take when they loan money or extend credit on your behalf.
If they feel like there is a chance that they might not get paid back in full, one of three things may happen: you may be turned down flat, you may be asked to pay a higher rate of interest, or you may be asked to make a down payment on the item that you are wishing to purchase (making the loan smaller and more approvable). Having a down payment for the car that you wish to purchase is ideal, although not all students will be able to swing a big down payment. If you can make a down payment of some sort, you may lower you overall cost of purchasing the car you want by reducing the amount of interest that the bank or lender charges you on the principle amount borrowed. Of course, there are car loans that are written without a down payment.
Building Your Credit With A Car LoanBecause of the ease of getting a student car loan, students have an opportunity to begin building positive credit history by making timely payments. Having a good credit score is important. Good credit not only allows you to borrow money when you need, open up lines of credit, and establish credit card accounts, it can also determine whether you land the job you have been training for because many employers now require a credit check when screening applicants for an open job position.
Additionally, your credit score can affect your ability to rent or lease an apartment, home, or condo as landlords often require that you submit to a credit check before allowing you to occupy their open units. In this regard, the student car loan can serve more purposes than just putting you behind the wheel of your dream car, but can also improve your borrowing reputation.Kate Ross has a Master in Finance and has been a university teacher as well as a financial consultant for years. She specializes in Unsecured Loans and also in helping people to get approved for Guaranteed Loans for Bad Credit, home loans, guaranteed loans, bad credit auto loans, guaranteed credit cards among many other financial products. For further information, please visit