You heard it right! Getting a car loan as a student is not a myth, but a real possibility. But beware of some challenges that you may have to face as a borrower
Yes, the challenge of getting approved for a car loan in Canada may seem arduous in the beginning. But you may have heard, “Never tell a young person that anything cannot be done”, for a young one can also prove his potential as a borrower. If you are keen to maintain a good credit score, you can increase your chances of getting approved for a car loan in Canada. There are many young buds that have taken financial responsibilities as a student where they may work on their own, and take care of their expenses, like living, food, housing, etc.
Considering that, you may be looking to ease your travel through the day where your school campus or workplace may seem a never-ending journey. Therefore, purchasing your wheels may seem an ideal option. Yet, having adequate cash to purchase the same may be quite daunting when you may try to apply for a car loan.
What is a car loan and how does it work?
If you are a young bud or any international student, you must know about the working of car loans in Canada. A car loan can be deciphered as a process of borrowing a fixed amount of money to purchase your car and then repaying the amount through monthly installments, inclusive of additional interest rates. There is a fixed tenure of paying consecutive monthly installments which are termed loan terms. Your monthly payments increase with the longer loan terms, and vice versa.
Being a secured loan, your auto loan uses your car as collateral (property or an asset) and your lender can repossess the car if you end up in default while failing to make on-time payments. Before lending you a loan, a lender verifies your credibility as a borrower, where your income, address, and credit history are considered before giving a nod. While these are important factors to adhere to, students with neither of these defaults can still make a way through but the trajectory can be challenging.
If you are looking for the best auto loans for international students in Canada, Carsfast is standing by your side to guide you through and help you secure the green flag.
What makes it difficult for students to get a car loan in Canada?
When you are a student with many aspirations and turning on your financial independence, the foremost thing that can hinder your pathway for getting a car loan in Canada is your credit score and income. Not being a strong candidate in these two factors can limit your potential as a borrower, and you must also know the other aspects of the process that can work against you. Once you comprehend these, you can accordingly begin your plan and make your journey easier.
- Income: When you are not having a steady income as a student where your ultimate focus is to study, it can make you undesirable in the eyes of a lender as a borrower.
- Credit history: Credit history depicts your credibility and trustworthiness where as a student you may be devoid of it.
- Loan amount: For a student, there is always a limit on the total loan amount that can be approved.
- Interest rates: Being a risky borrower with no or short credit history, a student may face inflated interest rates.
How to get car loans for international students in Canada
Before you jump in to apply for a car loan in Canada, you should consider these things for an international student auto loan:
- Social Insurance Number (SIN): It is quite significant to have a SIN that will be used to complete the car financing process. To get a SIN, first, obtain a student permit and a visitor permit that is issued by CIC (Citizenship and Immigration Canada) indicating you are authorized to accept and work in Canada. Besides, you will also require an ID card and a note of permission where you can head to the nearest service location to get your SIN.
- Driving license and auto insurance: The basic requirement for owning a car in Canada is to have a valid driving license along with auto insurance. When you are approaching for an international student loan in Canada, you can proceed with these; and if you are having a foreign driver’s license, you can visit the Service Canada location and use the reciprocal policy of your country to have a license.
- Student car loan: While you may be all set with other loan requirements, the only thing to care about is your credit history. In this case, you can:
- Check through your student permit to guarantee your stake as a borrower who will pay off the loan before it expires
- If you are a student who is working and earning some money, you can obtain a car loan at low interest rates
- If you pay a down payment for your car loan, you can get approved faster
- Documents required for financing a car: There are some documents that you must submit while applying for a student car loan in Canada:
- Proof of identity and address: You must have a government-issued ID
- Income proof: If you are working as a student, you need to bring 3 of your last pay stubs to ascertain your monthly income
- Driving license
Tips to get a student car loan in Canada
- Improve your credit score: Being a basic determinant in approving your car loan in Canada, you need to improve your credit history which depicts your credit score. While you can still get a car loan without a decent credit history, your loan terms may not be favorable and you may have to pay high vehicle interest rates in Canada. If you keep paying your dues and bills on time, you can significantly improve your credit score.
- Make a way for work: Having a monthly income can minimize your risk as a borrower in front of lenders. While you may not be able to work on a full-time basis, you can secure some part-time jobs to ensure you have a payment at the end of every month to repay the loan.
- Down payment: You can save some amount as a down payment which can save you a lot of bucks on the car loan as it can lower your monthly payments along with interest rates.
- Get a co-signer: If you are able to get a co-signer for a car loan in Canada, you can increase your chances of getting approved for a car loan who agrees to take over the loan if you fail to pay it, giving some assurance to the lenders.
- Getting pre-approved: If you get pre-approved for a car loan, you can understand the loan procedure with the total budget outcome it can cost so that you can plan ahead.
If you are ready to work harder and diligently, you can open the door to car financing even though you are a student. Once you secure a deal for a car loan, it can further improve your credit history if you are managing your debit responsibly which can influence your future financial course as well.
Do car dealerships care about student loans?
Almost all dealerships have some provisions for students who want to apply for a car loan. Though they may add some additional requirements to qualify for the same along with keeping the higher rate of interest, provided the risk potential of a student, they can provide the loans for students.
How can I buy a car with a student visa?
Once you locate the right lender, you can finance a car on a student visa, where it is ascertained that you will repay the loan before the expiry date of your visa. As per the type and length of the visa, you can apply for a student auto loan along with a reliable source of income, license, and SIN.
Can a student get financed for a car?
Of course, a student can get financed for a car if he can build his credit, and has some money for a down payment, along with a reliable income and a co-signer. With these things backing up his regard, a student can apply for car financing which can be approved if he ascertains his credibility as a borrower.
How can a college student afford a car?
You can try to afford a car as a college student by following the steps:
- You can begin to start your savings early which you can use as a down payment
- You can secure a part-time job that helps you to get a reliable income
- You can buy used cars at a dealership to save some bucks
What is the best way for a student to buy a car?
The best way to buy a car as a student is to apply for a car loan where you have to come up with a realistic budget and purchase the right car. Once you consider that, you can begin saving some bucks for a down payment. You can also make this journey a smooth ride by getting a prequalification.