It's not uncommon for first-time car buyers to be either college students or others without much credit history who may have to seek out solutions for "student car loans" that deal with their specific credit situations. Lots of students in particular find themselves caught in a very predictable situation: a first-time car buyer without a credit history faces a very difficult process in securing their first car loan, which will give them a more solid credit history. So how do these young drivers help themselves to get good interest rates on first-time car loans?
Getting a co-signer
One of the first common solutions to the issue of student car loans is for a student to secure a loan with a co-signer, usually a member of the family, with good credit and a solid financial history. It's important for all parties to understand that the co-signer assumes some responsibility in the case of nonpayment. However, within a family situation where a college student can rely on the support of family members, it's not uncommon for a parent to act as co-signer simply to secure good credit rates for the transaction.
Other tips for first time car loans
If no co-signer is available, the entire issue becomes different. Those seeking first time car loans without a credit history need to be very creative in order to unlock the possibilities available to them. One possible solution is to use the money that students pay for their living expenses as a way to build credit prior to getting an auto loan. If a student is living off of student loans, the process would look like this: the student would take out a credit card, use it for daily, weekly and monthly living expenses, and pay it off with whatever money is available, whether that money is from student loans or another income source. The obvious problem with this is that a student loan in itself carries interest. However, the student loan does not generally start to incur interest until the student has graduated. That means that a responsible student can use their living expenses to build credit prior to getting their first car. However, it can take a lot of responsible budgeting for this kind of process to work, instead of just burying the student in future debt.
More "No Credit Car Loans"
In addition to the above options, there are a number of online agencies offering "Student no credit car loans". A student can look into these as possible options, however, many of these sites appear to be somewhat generic lead-ins to a loan process that does not really offer low rates. Sites that include flashy titling and graphics with poor text including grammar and word errors should be looked at with good judgment.
Essentially students have the following options: use a co-signer, build credit, or find a really good lender. Any of these can be the key to getting decent interest rates on a driver's first auto loan.