Car Loans for College Students

From Carrie Reeder

Online Auto Financing

Almost every college student needs wheels. Unfortunately, getting a car loan isn’t always easy. Traditional banks and credit unions are usually not very eager to give car loans to college students, who may not have a great deal of income or credit. Thank goodness for online lenders!

Car Loans Online

Online lenders are one of the good things that have come with modern times. The competition between online lenders is fierce. Interest rates are lower than ever and even if your credit score isn’t perfect, you can still get a car loan that has reasonable loan terms.

If you are a college student who is looking for a car loan online, remember to use primarily vehicle loan companies that will help you compare quotes and offers from more than one lender.

This will help you get the lowest interest rate and best loan terms possible.

When applying for a car loan online, it is also important to make sure that you answer all of the questions on your loan application honestly and accurately. This will help the lender give you quote that you can rely on.

Applying for a Car Loan

Before applying for a car loan, you should determine how much you can afford to spend. College is stressful enough; you don’t want to have to waste time worrying about how you are going to make you car payment. Consider the following expenses to come up with a payment amount that you can afford:

• Car Loan Payment
• Car Insurance
• Fuel
• Car Maintenance (oil changes, tune-ups, etc.)

If you need help with the calculations, many online lenders provide loan calculators that can tally the numbers quickly. The lender may also be able to determine an amount that you can afford based on your income and other monthly expenses.

Source: http://businessmajors.about.com/od/studentresources/a/CarLoans.htm

Top 3 Auto Finance Companies for College Students

From Carrie Reeder

If you are looking for an auto finance company online, remember to use primarily vehicle loan companies that will help you compare quotes and offers from more than one lender. This will help you get the lowest interest rate and best loan terms possible.

Below is a list of the top auto finance companies for college students. I highly recommend these reputable lenders.

1. Auto Purchase Loans

Auto Purchase Loans is a very solid and reputable auto finance company. They offer loans to people who have good credit, bad credit, or no credit. Interest rates begin as low as 3.9 percent.

Top Picks

2. 1-800-Auto-Yes

Even if you have no credit or severe credit problems, this auto finance company can approve you for a car loan. With 1-800-Auto-Yes, you can have an answer within a few minutes, or at most, a few hours. If you have been turned down for a car loan before, this company may be able to help.

Top Picks

3. Credit.com

Credit.com is a trusted source of financing for people with good credit, no credit, and bad credit. To qualify for a car loan, the loan request must be between $7,500 and $50,000, and you must have a minimum income of $1,800. Interest rates begin as low as 3.9 percent.

Top Picks

What Makes a Used Car Loan Different?

Many consumers find financing a used car difficult. Their problems are only compounded when the used car is more than five years old, or a unique make or model.

Compared to “new car” financing, “used car” financing may as well be a completely different ballgame. Car values are different, interest rates are higher, and down payments increase with vehicle age.

When a new car is manufactured and delivered to the retailer, a value is assigned to the vehicle. This is called the “MSRP” (Manufacturer’s Suggested Retail Price) as seen on the Monroney Sticker. By law, the price is the same nationwide. This means a Honda Accord sold in New York has the same MSRP as a Honda Accord sold in Hawaii.

With the exception of a few options or colors, the vehicles are essentially identical, and "valued" at the same amount of money.

Banks, and leasing companies, can use the MSRP to establish values for new car loans without having to appraise (determine in the individual value) every new car. In effect, the new car becomes the “collateral” against the outstanding balance.

Used cars are a bit different. Even though two used cars may appear outwardly identical, their mileage and physical condition may make their values different by thousands of dollars. Establishing a used car value is not as simple as reading the asking price. Used cars must be professionally appraised for proper value.

Even with a professional appraisal, to error on the conservative side (and protect their investments) many banks and leasing companies will require larger down payments, or higher interest rates, on their used car loans. These may be significantly higher than those found on new car loans.

How much higher the interest rate or down payment is going to be is also determined by your personal credit score

Know Your Credit Score

The willingness of a bank or financial institution to lend money, and the interest rate paid on the loan, is directly related to your credit score .

In the United States, a credit score is a numeric value between 350 and 850 that is placed on your ability to repay loans. An average credit score is about 650. If your credit score is “high” (above 700) you will be fortunate to borrow money with a low interest rate without restrictions. If your credit score is “low” (below 600), financial institutions will consider you more of a risk—and lend you money at higher interest rates and with more restrictions (including a larger down payment).

The credit score itself is a complex mathematical algorithm based on your repayment history, available credit, outstanding balances, and some formula only known to the credit companies.

Raising your credit score is not an overnight process, but your score will go up month after month if your bills are paid on time, and outstanding debts are paid down. There are several companies who can help you raise your credit score for a fee—just keep in mind they cannot legally remove correct information (sorry, they cannot “erase” bad credit).

Checking your personal credit score is easy. The large credit-reporting companies in the United States include Equifax, TransUnion, and Experian. You can visit their sites directly to ask for a credit report. It is also common for consumers to visit a third-party company, such as FreeCreditReport.com, or CreditReport.com. Many of these will report all three credit scores, for a minimal fee.

An excellent online consumer resource about credit repair is found on this Federal Trade Commission site.

Where to Find Used Car Financing

If you are like most consumers, you won’t be paying for your used car with cash. This means you will be financing your purchase (loan or lease).

Before you walk into any auto sales transaction, it is always best to be “pre-qualified” (this means that a bank or financial institution has run your credit and “approved” you for an auto loan or lease). It is a simple process that costs nothing, and it will save you money in the long run.

First, contact your local bank or credit union first. You have an established relationship with them, and pre-qualifying for a loan will be easiest with someone who knows you. Tell them what kind of car you will be buying, or the price range that you are considering. Fill out a credit application, and most can pre-qualify you in hours.

If you do not wish to go through your local bank, you can try one of the many online financial institutions such as E-Loans or Capital One who will lend money for a used vehicle. Shop around for rates, as they will vary based on the company and your personal credit scores.

You can also have a used car retailer arrange to finance the vehicle for you. At first glance, this may appear to be the most expensive option (their finance department will mark-up the loan rate to make money on it); you can often negotiate a lower interest rate on the spot especially if you can show them you were pre-approved with a better rate.

The best way to finance a used vehicle is with knowledge. Know your credit score, know your financing options, and know what you are signing yourself into. Armed with this knowledge, financing your next used vehicle can be as pleasant as driving it home.

Source: http://usedcars.about.com/od/usedcarfinancing/ss/FiancingIntro.htm