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    Can You Take A Car Loan If You Have A Student Loan?

    Judy Miller - 2020-06-30T21:00:00.000Z

     Most experts don’t recommend taking on two loans at the same time, but it’s possible to get a car loan when you’ve already got a student loan. The requirements to get approved can be very stringent and vary by lenders, but it can be done.

    In this article, we explore the process and help you better understand the requirements.

    The Challenges

    After finishing college, many students are just at the beginning of their financial journey. This can make getting qualified for a car loan a little challenging. It’s even more difficult to get a car loan when you’re still in college and don’t have a steady income source.

    Here are some common hurdles that you’ll face when applying for a car loan alongside an ongoing student loan:

    • Showing Credit Scores - Before approving your loan, financial institutions need to be confident about your steady monthly payment. To this end, lenders consider various factors that include the evaluation of your credit history. Almost every lender would check your credit score to decide whether to approve your loan, as this would give them the required information about your creditworthiness. If you don’t have the required rating, lenders may consider other factors like GPA, employment, and more.
    • Proving Income Potential - There are students who are already working full time while attending college, but others that still have limited or zero income. In such circumstances, the lenders focus on the ability of the student to repay the loan amount. As there is no reliable or consistent income, it becomes difficult for lenders to approve a car loan.
    • Higher Rates - Even with a good credit rating, most student loan borrowers don’t get a good rate due to the lower debt-to-income ratio. If your credit history is below par, you aren’t likely to qualify for the loan at all. In rare cases, if you get qualified, the interest rates quoted will be extremely high and you’ll also be asked to pay a higher down payment, which could make it impossible to move forward. 

    Where Can You Get A Car Loan?

    As mentioned, when you already have student loan debt, not many lenders are ready to offer you a car loan. But, if you have stellar credit, a good source of income, or if you can bring in a cosigner, you might get approved. 

    Alternatively, you could try your luck with subprime or non-traditional lenders. You’ll need to do a lot of research on websites like Kelley Blue Book, Lending Tree, and others to figure out the best rates and terms. Here are some lenders that offer auto loans to students:

    • Auto Credit Express Car Loans - This is an online marketplace that connects borrowers with various lenders who are willing to offer loans to people with bad credit. This lender accepts credit scores as low as 300, but the APR and repayment terms offered will vary by lender.
    • Alliant - If you’ve maintained a fair credit rating (640+), chances are you’ll get approved for a car loan from this credit union. However, you probably won’t get its lowest APRs.
    • RoadLoans - RoadLoans accepts applications from borrowers with different types of credit ratings and ensures a streamlined approval process irrespective of the score. You can also add a cosigner to get better rates.

    How To Overcome These Challenges

    Overcoming these challenges and getting qualified for a car loan isn’t always easy. Yet, there are particular things that could help you improve your chances of getting qualified.

    • Some lenders offer discounted rates to students with a good GPA. If you’ve scored well, you might get a better rate. 
    • Make consistent repayments on your current debts to increase the chances of approval. Timely payments will help increase your credit score, thus allowing you to get approved for auto loans with better rates and terms.
    • Try clearing off smaller debts to lower your debt-to-income ratio. Most lenders like to see a DTI-ratio of 30% or lower.
    • Saving to make a car down payment will surely help you. The best way is to start with a small amount which would make the monthly payment affordable. Most lenders will ask for a payment of around 10% to 25%, so make sure you have it ready before applying.
    • Work on building a consistent stream of income. Lenders need to be sure that you’ll be able to make timely payments on the new loan while being consistent with repayments on your ongoing obligations.
    • Get a cosigner with a good credit score, if possible. They’ll act as an added guarantee and most lenders will have no problem in approving your car loan application.

    Bottom Line

    To sum up, it’s difficult but not impossible to get qualified for a car loan. It’s recommended that you consider this course of action only if you really need a car. If you do, define your budget and make a detailed plan. Additionally, work on your credit score, lower your DTI-ratio, and get a cosigner to get quicker approvals.