When it comes to buying a BMW, for most people, having a steady income and good credit are the two keys to getting the desired loan. However, for college students, the reality is somewhat different. Low income or absence of one, poor credit or zero credit – with all those issues, student car loan seems to be out of reach.
So, how to get a car as a student?
The good news is that a lot of lenders out there are ready to provide college and university students with car loan options. What is more, they even lend a helping hand to international students, recent high school and college graduates. As an alternative to great credit, students have a chance to apply with a cosigner, show a job offer, or apply in the case of the absence of negative marks on the credit file. Below, we provide some key details on how to get a loan for a car at 18 and stay sane.
Understanding Car Loan Basics
Owning a BMW car can be exciting, but understanding the basics of car loans is crucial before hitting the road. Here’s a quick guide for students:
- What is a car loan? A car loan is a financial tool that helps you buy a car by borrowing money from a lender. You pay back the loan over time, usually with interest.
- Down payment. Before getting a car loan, save up for a down payment. This is a percentage of the car’s total cost that you pay upfront. A larger down payment can lower your monthly payments.
- Interest rates. Interest is the cost of borrowing money. The lower the interest rate, the less you’ll pay over the life of the loan. Shop around for the best rates from different lenders.
- Loan term. The loan term is the time you have to repay the loan. A longer-term means lower monthly payments but more interest paid overall. Shorter terms have higher payments but less interest.
- Monthly payments. Your monthly payment includes both the principal (the loan amount) and interest. Make sure it fits your budget.
- Credit score. A good credit score can help you get a lower interest rate. Pay bills on time, keep credit card balances low, and check your credit report regularly.
- Total loan cost. Consider the total cost of the loan, not just the monthly payment. Factor in interest and fees to understand the true expense.
- Preapproval. Get preapproved for a loan before shopping for a car. It shows how much you can borrow and makes the buying process smoother.
- Read the fine print. Before signing anything, read the loan agreement carefully. Understand all terms, conditions, and fees associated with the loan.
- Budget wisely. Remember, owning a car involves more than just the loan. Factor in insurance, maintenance, and fuel costs to ensure it’s affordable.
If college students make sure to understand these basics, they will be empowered enough to make informed decisions when wondering, “What should my first car be, and how can I finance it?”
Choosing the Right Car Loan
How to buy your first car teenager usually dreams about? You need to consider all the pros and cons, learn the basics of the process, get all documents ready, and stay positive. Picking the most suitable car loan is crucial for a cost-effective and smooth purchase of your very first vehicle. Here’s a quick guide to help you make the right decision.
Why Consider a Car Loan as a Student?
As a college or university student, you may wonder if getting a student car loan is a practical choice. Absolutely, yes! We have some compelling reasons to make that kind of decision ASAP:
- Convenience and mobility. When it comes to these two parameters, cars can work magic. They enable young people to commute to work, classes, and various social activities based on their own schedule without sticking to the public transport flexibility.
- Job opportunities and internships. With a car in your arsenal, you have more opportunities for part-time jobs and internships at your disposal. You have a chance to explore various options beyond your campus and enjoy more secure employment.
- Time efficiency. Since cars significantly reduce commute times, you get to enjoy time efficiency during those busy days when juggling extracurriculars, thoughts like “I wish someone could do math for me,” and classes seem to be unbearable.
Eligibility and Requirements
Can university students get car finance? Of course. If you’re considering a BMW car loan, ensure to understand all eligibility criteria and all required docs. To help you navigate the process, we’ve picked out some key details below.
When it comes to the eligibility criteria, the main include:
- Age requirements. You have to be at least 18 years old in order to qualify for a car loan.
- Enrollment status. A lot of lenders provide student car loans to young people enrolled in accredited colleges or universities.
- Income and employment. While a steady income is beneficial, some lenders may consider part-time jobs, internships, or stipends as proof of financial stability. A co-signer with a stable income can also enhance eligibility.
- Employment and income. There’s no doubt that nothing can beat having a steady income. However, some lenders out there consider internships, part-time jobs, and stipends as solid proof of financial stability. At the same time, you can also use a cosigner with a stable income in order to boost your eligibility.
- Credit history. Undergrads with limited or no credit history may still qualify for car loans, especially those designed for students. There are some lenders, however, who tend to consider other factors, such as income and employment status, when assessing creditworthiness.
- In the case of required documentation, you will most likely have to prepare the following:
- Enrollment proof. Students are required to provide docs like an acceptance letter, class schedule, or student ID to confirm their enrollment status.
- Income verification. It is important to provide income proof. This may include bank statements, pay stubs, or/and a letter from your employer. Is your income limited? In that. case, approach a cosigner who has a stable income to strengthen your application.
- Credit history. While young people like you may have a limited credit history, it is important to be prepared to share any existing credit information. Some lenders may consider factors beyond traditional credit scores.
- Personal identification. At this point, you will have to provide a valid driver’s license or any other government-issued identification as part of the application process.
- Residence proof. You may be required to give proof of your current address, like a lease agreement or utility bill.
- Vehicle info. Is there a specific vehicle that you already have in mind? If yes, you may need to give some details like the model, the year, the make, and the VIN (Vehicle Identification Number).
- Insurance info. In most cases, lenders require students to provide proof of insurance coverage for the car. Do some research on insurance options and obtain a quote before you proceed to finalize your loan application.
- Down payment. Every student must be ready to make a down payment. While the amount varies, a down payment demonstrates your financial commitment and may improve loan terms.
- Cosigner info. If you have a co-signer, s/he will need to provide personal and financial information. When it comes to a co-signer with a good credit history, this person can positively impact your future loan approval and terms.
Budgeting for Your Car Loan
When considering a student BMW car loan, it is crucial to create a realistic budget. Using the practical tips and tricks below, you will 100% manage your finances effectively:
- Determine your total budget by calculating your monthly expenses and income.
- Understand your loan terms together with the interest rate and the total loan amount.
- Keep in mind insurance costs before you finalize the vehicle purchase.
- Set a budget for maintenance and repairs in order to be ready for unforeseen issues.
- Consider fuel expenses based on your expected mileage.
- Evaluate your lifestyle to get a better idea of your spending habits, and avoid stretching your budget.
Pros and Cons of Car Loans for Students
When it comes to the advantages of getting a student car loan, we’ve already mentioned increased mobility, time efficiency, and more access to job and internship opportunities. However, nothing is perfect, so let us enlighten you on some cons of the issue:
- Financial burden. You face a financial commitment that can become a real burden for students on a tight budget.
- Depreciation. Usually, vehicles depreciate with time, which means you may find yourself owing more on the loan than the car is worth.
- Limited income. Since most undergrads have limited income, unexpected expenses associated can arise, impacting the ability to make monthly payments.
- Maintenance costs. Since vehicles require regular maintenance, you encounter unexpected repair costs that worsen your financial situation.
To cut a long story short, while car loans come with a bunch of benefits for young people attending colleges and universities, you should also weigh all the financial implications. With some thorough research and responsible budgeting, you will be ready to make informed decisions on your first BMW car ownership during the best years of your life.
