When you are a student, buying a car is a big step in establishing your independence. But with no credit history and no decent income proof, getting a car loan can be very difficult. And if your parents are willing to help you out, it’s a great thing but if not it can get very frustrating when you start looking for a decent set of wheels.
There are a number of banks that provide loans without verification of your credit history. These loans are called no credit check car loans. The lenders will not ask for the students credit scores and hence it is very easy to get a loan by this method. But the problem is that the interest rate quoted will be much higher than a conventional credit check auto loan. Getting a car becomes all the more important if you live in a far flung college town and cannot rely on infrequent public transport for essential travel.
Once you have decided to buy a car on your own finances, the next step is to find a suitable bank to provide you the loan. You can start off by looking online for various options for lower interest rates. This is much better than going to different banks personally and asking around for loans when they might not be ready to cater to your no credit needs. but if your parents are willing to co-sign on a loan, things can get a lot easier for you. And you can get it from the same bank where your parents do their banking. And the interest rates that you will get on such a loan will be much lower than a no credit history loan because the credit history of your parents will be used to certify your loan. If you are unable to pay the loan by the set period, your parents will have to repay it in full.
But if you go for a loan independently, you can be sure that you will not get interest rates on par with a traditional loan. And the terms and conditions will also not be as flexible as a conventional loan. Apart from students, even borrowers with a sub-prime can get such loans. Auto loans are basically secured loans since the vehicle will behave as the collateral and hence the risk sustained by the lender is minimized. If in case you fail to pay your monthly payments, your car will be seized by the loan retrieval agents. Many lenders provide guaranteed loans for individuals who do not have a credit history.
The paper work for such a loan is practically non existent compared to conventional loans. But you will however have to show sufficient income proof and also show details of your income history. A few companies will also require you to make a down payment on the car since in that case you would have invested sufficient amount of money in the car and would not want to default on the loan. And if you do, the bank can retrieve more than what they paid you as loan if they seize the car and sell it.