For students, having a car can make life easier and can broaden your opportunities. You can drive to a job, for example, or visit your nana on the weekends… You might think, however, that you won’t be able to get finance to buy a car on a student’s income but you may well be wrong …. How do car loans work? Car loans are loans that are secured by a car and taken out for the purpose of buying the car. If you fail to repay the loan, the lender has the right to repossess the car. You repay the loan over a set period, usually between one and seven years. Interest is applied to this loan amount and added to your monthly repayments. You might be able to find unsecured car loans but these are basically renamed personal loans. An unsecured loan doesn’t use the car as security so it’s riskier for the lender and you’ll probably have a higher interest rate applied. If you’re looking for a student car loan Australia, look at secured loan first. Checking your eligibility If you meet the lender’s eligibility requirements, then you may well be able to get a car loan. When you’re looking for a car or personal loan Australia tends to need you to be either a citizen or permanent resident, at least 18 years of age and to have a regular source of income. Can I get a loan on Centrelink payments? Some lenders won’t extend a loan to applicants whose main source of income is Austudy, Newstart or Youth Allowance. You should spend some time on a reliable comparison site to look for the lenders “friendliest” to you and your circumstances. About comparing car loans When you’re comparing car loans, there are several things you need to focus on. The interest rate The interest rate determines the amount of interest that you’ll pay on your loan. The lower the rate, the lower your monthly and total repayments will be. You could opt for a fixed rate loan, so your repayments stay the same for the life of the loan, or a variable rate loan, which means your payments will fall and rise in line with the base rate. Fees and charges Lots of car loans will apply additional fees and charges as part of the loan agreement. You need to know what, if any, charges you’ll have so that you know what your total costs will be. Flexibility of repayments Many lenders will let you pay weekly, monthly or fortnightly, according to your budget and needs. If you’re able to repay the entire loan in full or make extra repayments to pay it off sooner, then you need to know if this will involve penalties. Extra features Look for features like redraw facilities for extra repayments, online account management options, pre-approval or a car-buying service to help you to find your best car. Tips for getting a car loan As a student, you might only work part–time, or during the holidays. This means you have a relatively low income and, if you’re still young, next to no credit history. This can be as tricky as a bad credit history when it comes to getting loans, so make sure you use these tips to improve your chances. Build up a good credit history Having a good credit history means more chance of approval and also more chance of getting a good interest rate. Make sure you pay your bills on time, including your mobile bill and any utility bills, and try not to apply for several loans or credit cards within a short period of time. Obtain your free credit report so you know what’s on it. Get a deposit together If you have some money ready to put down on the car, then you’re more likely to be approved for a loan. You’ll also have smaller monthly repayments. Use a guarantor If you don’t have much of a credit history then using a guarantor for your car loan is a good idea. Your guarantor will usually be a parent, another relative or a good friend who’s financially stable and employed. This person takes on the financial and legal responsibility if you can’t make your repayments so this makes it easier to get approved for the loan. Do your best to keep up with your repayments, though… How to apply for your student car loan If you’ve chosen the car that you want, then you need to find the loan that suits you and your circumstances best. It’s vital that you understand your loan options and how to maximise your chances of approval. Compare your loan options You need to decide between a secured car loan or an unsecured loan, as well as between a fixed and variable interest rate. Take a look at as many lenders and loans as you can handle before making a shorter and shorter shortlist. Examine the eligibility criteria of each lender You must ensure that you meet all the eligibility criteria before you apply for a loan because if you can see that you don’t and apply regardless, not only will you be rejected but you’ll damage your credit rating. Most lenders want you to be over 18 and have a regular income, preferably from employment. Have all your documents ready When you make your application, you’ll need to have a legitimate form of ID, payslips and any other information relating to your employment, finances, expenses and existing debts. If you know which car you want, you’ll need to submit its details – make, model and year, VIN or chassis number, registration number and purchase price – to the lender. Submit the application Depending on which lender you apply to, you’ll get a response in anything from a couple of hours to a few days. If you’re approved, the lender will most likely buy the car direct from the dealer and then transfer the titles over to you. Compare car loans from Australia’s banks, credit unions and other lenders at InfoChoice. The information contained on this web site is general in nature and does not take into account your personal situation. You should consider whether the information is appropriate to your needs, and where appropriate, seek professional advice from a financial adviser. If you or someone you know is in financial stress, contact the National Debt Helpline on 1800 007 007.