Can Students With No Credit Score Get Car Loans?

September marks the beginning of a new school year, and as students figure out how to travel to and from college or university, the idea of owning a car often arises. While public transport is an option, getting around is much easier and more convenient if you have your own car. 

As a student, you likely haven’t had the time to build up much credit; you may have just applied for your first credit card or registered a cell phone in your name, but your credit history is short. While it may appear that the odds are stacked against you when you want to buy a car, the reality is you can still apply and get approved for credit as long as you visit a dealership with great lending connections. 

Apply For a Bad Credit Car Loan

Even if you have poor credit, you can still apply for a bad credit car loan. These loans are designed for people with limited credit, including newcomers to Canada, students, and those with a low credit rating. 

What Is a Bad Credit Car Loan?

If you have a limited credit history and don’t have many sources of credit, it’s difficult to get a car loan from traditional lenders, including banks and credit unions. They usually offer loans with interest rates that are close to the prime rate, which is ideal as the cost of borrowing is much less. These loans are usually reserved for individuals who can show the following:

• A stable source of employment

• A good credit score

• Multiple sources of credit

• An established credit history

• A record of making your payments on time

Lenders want to know you can manage credit responsibly and that you have the ability to pay back your loans. If you carry less risk, they offer favourable loan terms with lower interest rates. 

When you have bad credit or no credit, you can still get auto financing, but with higher interest rates. 

Steps To Help Students Get an Auto Loan

How Much Can You Afford?

Step One: Start by figuring out how much you can afford to pay each month for a car. Create a budget for your expenses. Factor in items such as rent, food, utilities, tuition, and school supplies, along with any other miscellaneous expenses.

Step Two: If you have income from a part-time job, student loans, or if your parents help out, factor this in to find out what monthly payment you can afford for your car each month. 

Step Three: Factor in other costs, including car insurance, gas, car maintenance, and repairs.

Step Four: Then use our Car Loan Calculator tool to find out the maximum cost of the car that you can afford with this budget. 

Step Five: Browse our online inventory to find a car that is suitable for you, or come in to see us, and we can help you find what you need. 

Step Six: Apply for pre-approval online or sit down with us at our dealership to find out what to expect and walk through the process with us step-by-step. 

What Do You Need to Apply For a Loan?

You will need the following items when making your loan application:

• One piece of government-issued ID

• Two pay stubs or six months of bank statements

• Proof of employment

• Information about your expenses

Tips to Help Students Qualify for Better Loan Terms

If you have no credit, there are several actions you can take to improve your chances of qualifying for a loan and getting better loan terms. 

Apply for a Student Credit Card

Many banks offer credit cards to students. They often waive any annual fees, and you can even get perks such as free movie tickets or cash back. 

Put Utility Bills in Your Name

If your phone bill is in your parent's name, set up a new account so you can put the phone in your own name. Many cell phone companies report bill payments to Equifax and TransUnion, so this is registered as another source of credit. 

Offer a Downpayment on a Car

Offering a downpayment is a great way to lower the amount of money you need to borrow. It also helps to keep your borrowing costs down. If you have a part-time job, try to save some money every month for a downpayment on a loan. While you can buy cars with a zero downpayment, saving money and offering it as a downpayment is more favorable to the lender. 

Get a Cosigner

While you can qualify for a loan without a cosigner, having one may help! If you have a parent or close friend who is willing to cosign your loan, this can go a long way to securing a loan with better rates. 

Choose a cosigner with a good credit rating and a strong, established credit history to get the most benefit. It is also important to remember that your ability to pay back the loan can affect their credit rating too, so be responsible and make your payments in full and on time. 

Don’t Apply for a Loan with No Credit Check

Used car dealerships with no credit check may seem like a good option, but these loans usually come with very high interest rates. Before committing to this type of loan, compare offers from lenders of bad credit car loans to see if you’re getting a good deal.

The Importance of Building Good Credit

As a student, it may feel like you have a long way to go before looking to buy a home, but you need to lay the groundwork for these large purchases now. Credit allows you to buy the home you desire. If you have an entrepreneurial drive and eventually want to start your own business, credit will allow you to fund it. 

For this reason, it is essential to start building credit early; that way, when you’re poised to make your move, accessing credit will be the least of your worries, and you’ll qualify for better loan terms and lower interest rates. 

Tips For Students to Build Good Credit

Apply for Credit Cards

Use your credit wisely, and don’t max out your cards. If you are wondering how much you should spend on each of your cards, a general rule of thumb is to keep your spending at less than 30% of your available credit. 

Take Charge of Utilities 

Put utility bills such as phone, electricity, and gas accounts in your name wherever possible. These bills are reported to the credit bureaus and will appear in your credit report.

Pay Your Bills

Your credit score is affected by your ability to pay your bills in full and on time, which is why it’s essential to be aware of the due dates. Don’t wait until the last minute to pay your bills. Sometimes it takes a few days for the transaction to be recorded, particularly around weekends, so pay your bills early to avoid any problems. If you have trouble remembering when your bills need to be paid, put a notification in your phone to keep you on track or sign up for automatic payments when you can. 

How Insta Auto Solutions Can Help Students 

At Insta Auto Solutions, we care about getting you into a car, and we want to help you with your credit journey. 

Great Choice of Vehicles

At any given time, we have hundreds of vehicles on our lot! We only offer quality used vehicles that have undergone thorough inspections and are completely safe to drive. You can browse our inventory online and have full access to the Carfax report for a thorough vehicle history. 

Qualified and Friendly Staff

Our aim is always to make your experience an enjoyable one! After all, you are purchasing a new car, and if it's your first, this is an exciting time. If you’re new to car buying, we’ll guide you through the process and are always happy to answer your questions, so drop in or give us a call. 

Work with Multiple Lenders

We work hard to find you the best loan terms. We have strong relationships with the lenders and understand how they work and what you need to qualify for a loan. We don’t just blindly send out loan applications; we choose lenders we know will approve your loan and always negotiate for the best interest rates.

Committed to Helping You Build Good Credit

Although navigating credit can seem daunting, we take the time to help you understand your credit report so you understand what you need to do to improve it. While bad credit car loans do tend to have higher interest rates, we will stay in touch and work with you to refinance your loan for a better interest rate once you’ve built up your credit history.

Students, Get Approved for Your Auto Loan Today!

Getting a car loan with bad credit and no cosigner is easy at Insta Auto Solutions. We have the experience and work with the right lenders to get you into a car in no time. Contact us today or visit us at one of our locations to find your first car.