Can You Use Your Student Loan To Buy A Car?
Having a car while you’re a student opens up a whole new world of freedom. Not only does it make it easier to travel home or visit family when you need to, but it can also give you better opportunities for part-time jobs or apprenticeships.
A car can even make the task of travelling from university or college with a bag full of books much less tiresome.
So if you’ve passed your driving test before or during your studies, you’ll be in a great position to get a car and be able to say farewell to public transport and hello to the open road.
There’s just one small problem to overcome first – how are you going to pay for it?
Should you use your student loan to buy a car?
The simple answer to whether you can buy a car with your student loan is yes. You can use your student loan to pay for whatever you like, the money is yours. The question you need to be asking, though, is should you pay for a car with your student loan?
While it’s up to you how you spend it, your student loan is ideally there to support your education experience. That means using it to help with general living costs, textbooks, stationery, food and – let’s be honest – a bit of socialising.
It doesn’t really stretch that far once you take all your expenses into account, so while you can buy a car with your student loan, it’s probably not the best idea to use all your money in one go.
Can you get car finance if you’re a student?
For most, it’s difficult to cover the costs of buying a car upfront. For students, with the expense of studies and perhaps without a full-time job, it can be even harder.
However, being a student doesn’t mean you can’t buy a car on finance. Your application for finance will be assessed in the same way as anyone else’s – based on your credit history and affordability.
Do you need a deposit for car finance?
There are several types of car finance and which one you choose depends on your personal circumstances. With some dealers, you’ll have to make a deposit if you choose hire purchase, personal contract hire or personal contract purchase finance.
However, here at Hippo Motor Finance, that’s not the case. All our vehicles come with a £0 deposit option, meaning you don’t have to face any big costs upfront.
But remember, a deposit isn’t an additional fee – it’s actually a percentage of your overall payment. So the bigger your deposit, the smaller your monthly repayments will be. And vice versa.
Whatever your situation, though, there will be an option for you. If you’re thinking about financing a car, it’s ideal to talk to a specialist first, like someone from the team here at Hippo who have years of experience in dealing with all types of financial situations and can help find a solution for you.
Do you need a job to get car finance?
For most students, it’s near impossible to hold down a full-time job while in education. And while many students have part-time jobs, your earning capacity is naturally limited this way.
However, just because you don’t have a job doesn’t mean you won’t be accepted for car finance. What’s important is evidence of affordability. So as long as you receive some form of regular income and can show that you are in a position to make your repayments, that can be enough.
How important is your credit score in getting car finance?
Your credit score is a rating based on your financial history. This score helps lenders to determine the potential risk you pose as a borrower and which interest rates you qualify for.
And although a credit score is only one of a few things lenders look at when deciding whether to approve your application, it’s quite a big one.
The problem of applying for car finance when you’re younger is that you haven’t had the time to build up much credit history, and that can have a negative impact on your score.
Of course, this doesn’t mean that you can’t improve on it to reassure the lender you can manage your money responsibly.
Top tips to improve your credit score fast
|Register on the electoral roll||Open a bank account|
|Avoid missing payments||Take out a credit card|
Register on the electoral roll
The chances are, you’ll already be registered on the electoral roll at your home address. However, you can also register at your student address. This helps lenders easily find you when you apply for credit and it’ll also bump up your credit score.
Open a bank account
Building a good financial history all starts with managing your money well. And one of the easiest ways to do that is with a bank account.
Set up direct debits from your account and make sure you always have enough money in there to cover bills.
An overdraft facility will help build your credit score. If you have a student overdraft with no fees, though, make sure you can pay it off before the promotional offer ends and the bank starts to charge you.
Avoid missing payments
It’s not only credit cards that show up on your credit report. Utility and mobile phone contracts often appear there too.
If you miss a payment or are late, it’ll show up on your credit report and lower your score. It’s a good idea to get into the habit of setting up direct debits and making payments on time.
Take out a credit card
If you qualify, taking out a credit card to help you build up a credit history is an option. Make sure you always use a comparison site with a soft search to find any offers, as hard searches for credit will show up on your report and again impact your score.
Once you have the card, aim to only use a small percentage of your credit limit and make sure you make repayments on time.
Are there options for students with bad credit?
Unfortunately, if you have a bad credit rating, you may find it a little harder to find a good car finance deal. It takes time to build up a good credit rating, but we appreciate that not everyone can wait.
If you’re worried about bad credit, Hippo can help. We specialise in helping customers with bad credit get better car finance deals.
Our soft search eligibility check will allow you to find out your best options without harming your credit score. You’ll have access to a large range of specialist lenders who understand your position, so bad credit won’t necessarily hold you back.
Can I use a guarantor?
One final option you have as a student to improve your chances of being accepted for car finance is by using a guarantor.
Typically a close relative, like a parent, a guarantor will act as someone who is prepared to pay your loan should for any reason you be unable to. It’s important that they have a good credit history, as the lender wants to minimise the risk.
Remember, if you fail to make payments, both your and your guarantor’s credit score can be negatively impacted, so it’s important not to go into this lightly.
Choosing the right car for you
If you’re a student and would like to find out whether you qualify for finance, you can do it all online for free.
Simply click Apply Now below, fill out our short form and we’ll let you know if you’ve been approved without affecting your credit score.