Car Loans for Unemployed College Students
Getting a car loan as an unemployed college student will be hard, but it is possible if you have alternative sources of income or a co-borrower.
Written by Holden Easterbrook
Reviewed by Jessica Barrett
Though it will be difficult, you can find a car loan as an unemployed college student. However, along with the usual loan qualifications, you’ll need to have evidence of some steady income, a co-signer or co-borrower, and a decent credit score.
Finding a lender for a
car loan
can seem like an uphill battle for most college students, and doing so while unemployed as well can feel impossible. Thankfully, you still have a chance at getting the auto loan you need, even if you’re an unemployed college student.That’s why the
car insurance
broker app Jerry
is here to help. With this article in hand, you’ll get a better idea of the car loan application process, how being an unemployed college student will affect your approval prospects, and how to save on insurance for your new car with our trusted quote comparison app
.The car loan approval process
In most cases, you’ll acquire a car loan from a bank, credit union, or financing company. Once you’ve been approved for a loan, your lender will determine the terms of the loan. These terms will cover everything from the cost of your monthly payments to the repayment period and interest rate.
Before approving you for a loan, your prospective lender will consider the likelihood of your loan being repaid on time. They do this by checking your credit score as well as your current debt-to-income ratio.
It’s important to keep in mind that most car loans are considered secured loans. That means your car can be repossessed by your lender if you fall behind on your monthly payments.
Car loan approval advantages for college students
Though college students can have a harder time than most when it comes to getting approved for a car loan, they have some advantages that other groups don’t:
- Some lenders offer rebates or discounts for college students who finance their car purchases through them.
- You don’t have to rely on justyour credit scorewhen trying to get approved for a loan—many lenders will consider your GPA as well.
- If nothing else, keeping up with your loan payments is a great way to build your credit score for the next time you need to take out a loan.
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Why is it so hard for college students to get car loans?
Though it can feel as if lenders discriminate against college students, there are three major reasons for them being hesitant to loan large sums of money to those still in school:
- Limited income—because of their course load and schedule changing each semester, it can be difficult for students to find the time for a full-time job on the side.
- Little or no savings—the employment challenges that college students face can leave them with no savings or not enough to make a downpayment on a loan.
- Lackluster or nonexistent credit score—many students are only just beginning to build their credit history and it will be several more years before they have a worthwhile credit score.
How to get a car loan as an unemployed college student
As an unemployed college student applicant, you’ll have a significantly more difficult time getting approved for a loan when compared to your fellow students. Rest assured, though, that you can still get the car loan you need, so long as you’re willing to go the extra mile.
Take stock of your credit and finances
Your first step towards getting a car loan will be
checking your credit score
. You’ll want a score of 700 or more to have the easiest time getting approved for a loan, but you should still be able to find a lender with a score as low as 580.If your credit score is
below 580 or nonexistent
, you’ll need to submit a copy of your GPA when applying for a loan. Having a high GPA is another way to prove to potential lenders that you’re a responsible individual. Finally, you’ll want to take a moment to consider your finances. If you’re unemployed, you’ll need to find alternative proof of income to have a chance at getting approved for a car loan. Here are some options:
- Veteran’s benefits
- Investment dividends
- Upcoming inheritance
- Pending employment offer
Unfortunately, you cannot use unemployment benefits to get approved for a car loan because it is only a temporary form of income. Prospective lenders are looking for long-term sources of income to be sure that you won’t find yourself unable to repay the loan in the upcoming months or years.
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* checking your rate won’t affect your credit score
Check your rate
* checking your rate won’t affect your credit score
See if you can get a loan from a credit union
Credit unions are often the superior choice to traditional banks or financing companies. Along with being more flexible with their loan terms, they are far more willing to give you a loan for a small amount—like when purchasing a used car for $10,000 or less.
Get a co-signer or co-borrower
If you’re unemployed, you’ll need a co-signer or co-borrower if you want to have a fair chance at getting an auto loan. Lenders will only approve loans for people with enough gross income to cover the monthly loan payments, and having a co-borrower will allow you to combine your income with the other person to meet your lender’s minimum income requirements.
Luckily, your co-signer or co-borrower doesn’t have to be family—friends and significant others can help you shoulder the burden of a car loan. Just be sure that you can make your loan payments, otherwise, your co-signer will be stuck repaying the full amount of your loan.
MORE: What’s the difference between a guarantor and co-signer?
Get pre-approved before car shopping
Though it may feel like an extra step in an already involved process, pre-approval will be an immense amount of help in the long run. Not only will it keep you from overspending on a car, but it will help you negotiate a better purchase price when you find the vehicle that’s right for you.
Settle in for a long wait
When buying a new vehicle, finding a loan with the best terms is just as important as finding the right car—especially in the case of unemployed college students. It could take a while to simply find a lender at all.
Because of that, don’t expect to find a car loan right away, and don’t jump at the first offer that comes your way. Waiting for a loan with reasonable terms will pay off in the long run, and may even give you the time you need to find a sustainable source of income.
Key Takeaway To better your odds of getting approved for a car loan, you’ll need an alternative source of income, a co-signer or co-borrower, and be willing to wait for the best loan terms.
How to find affordable car insurance
When you’ve found a car in your price range and, more importantly, a lender who is willing to work with you, you’ll need to find a car insurance policy that won’t break the bank. Thankfully, you don’t have to do the comparison shopping yourself, because the
Jerry
super app will find you the best insurance policies available.As a licensed insurance broker, Jerry has access to the best insurance quotes currently being offered from a pool of more than 50 insurance providers. All you have to do is get the app, answer a few questions, and then pick and choose from your new policy options.
You can save as much as $887 every year on your car insurance payments with Jerry, so download the app right away!
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Can I get a car loan if I’m unemployed?
Yes, but you will have a significantly harder time doing so. To help your approval chances, you’ll want to find a co-signer or co-borrower and proof of some sort of income.
Can I use my unemployment benefits to pay for a car loan?
No. Unemployment benefits are only temporary, and a potential lender will want to know that you will have the finances needed to cover the monthly loan payments for the entirety of the repayment period.
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