Getting a car loan for an unemployed student might be difficult, but in today’s world, where everybody needs to be able to get from point A to point B quickly and safely, and probably several times a day from several point As to multiple point Bs, it is especially important.
However, before you give up, consider your other options and see how they compare. There are four possible routes to take to get around:
a) take a private taxi,
b) take the bus, train or a minibus taxi,
c) get your mom or best friend to lift you everywhere, or
d) buy your own car
Option a would be the most convenient. Imagine never having to stay sober or even awake on your journeys to and fro? Just call a service and have them drop you at the door, not worrying about parking, car insurance or maintenance. It would be pure luxury; if you could afford it.
Option b is do-able, but let’s face it, it’s also dangerous. Waiting at bus stops and on the corners of roads for a minibus to arrive at all hours is not the best situation to put yourself in, especially if you are carrying a laptop.
Even if you live near your parents they are unlikely to want to lift you back from late night study sessions at the library and fetch you from student nights at the local pub at 2am. Your best friend might be more inclined to help you out, providing that he or she actually has a vehicle to begin with.
It seems that buying your own car would be the best route to take. Unfortunately, this has its own set of obstacles. Firstly, you would need to purchase the car and this, in most cases, requires you to take out a car loan. In any situation there are several requirements for taking out a loan.
1) Generally, banks and loan services want to see that you have a good credit history, so they know what they are getting themselves into.
* PROBLEM: how many students or people in general have a credit history, good or bad, by the time they are in their early twenties? Not many, is the answer. If you try to open an account somewhere, you are likely to have the same problem as you would with a car loan: no credit history = no account; no account = no credit history.
* SOLUTION: start by trying to grow your own credit history. If you have a cell phone contract in your parents name, have it transferred into your name and have them sign as surety. Try to open an account in a retail store, again with a parent signing as surety. Spend a small amount and make sure you pay it back when it is due.
This, however, is not a quick fix measure. Growing a credit history takes time.
2) Banks and loan services need to see that you have a steady income so that you will be able to pay them back every month.
* PROBLEM: as an unemployed student, you obviously do not have a regular income. Even if you studied part time and got a job, it would be unlikely that your income would be high enough for the banks to accept.
* SOLUTION: unfortunately, there is no solution for this particular problem. Even if you were newly employed with a salary that meant you could afford the monthly payments, it would still be difficult to secure a loan without a work history.
3) You would usually have to come up with a deposit for the car which would be quite a significant sum.
* PROBLEM: it is unlikely that you have this kind of money lying around and getting a loan for the deposit would prove just as difficult as getting a loan for the car itself.
* SOLUTION: the best solution would be if you had a family member who could lend you the money for the deposit. You could sort out your own terms and conditions for how and when you pay it back and whether you will pay interest or not.
4) Because of your age, if a bank considered giving you the car loan, they would require someone older, with a steady income and a good credit history, to sign alongside you as surety.
* PROBLEM: it might prove difficult to find someone who is willing to take that risk.
* SOLUTION: again, a family member would probably be your best option.
To sum, your chances of getting a car loan as an unemployed student would be better if you have the following:
- a) A small credit history
- b) The money for a deposit or someone who is willing to lend it to you
- c) Enough money to pay your monthly payments and some way of proving it
- d) Someone with a good credit history and steady income who is willing to sign surety for you
If you lack some or all of the above then the best advice would be to look around at loan services, there may be some who are willing to take a risk. Of course, be careful of high interest rates in a scenario like that.
Another option is to buy a second hand car from a private seller. This would probably be cheaper and you could get a smaller loan, or borrow the full amount from a relative or friend. There are, of course, several issues you must take into careful consideration.
* Would you be able to tell if the car is a good one? If not, take someone who knows cars with you.
* If it should break down or require a service, would you be able to afford the costs, or would you be able to fix it yourself?
Whatever option you choose, make sure that you weigh up all the pros and cons carefully and if you choose to try and get a car loan as an unemployed student, always be careful of getting in over your head with debt. Talk to someone at your bank for more detail and always read the fine print.