How to get a Student Car Loan in Toronto, Ontario, Canada?
Posted on August 14, 2017
Many students in Toronto and Mississauga find that life feels easier if they have access to a reliable vehicle. An increasing number of lenders are trying to make the process of obtaining a car loan when you’re a student a little bit easier. Follow these important steps to increase your chances of qualifying for a car loan while you’re a student. As with any type of loan application, research and preparation are key.
Step 1: When you’re preparing to apply, full enrollment as a student is essential. Be prepared to show proof of enrollment, and keep in mind that certain lenders impose age restrictions on who can apply for a student car loan. For example, some offer car loans only to people aged 18-24; others are more flexible.
Step 2: Get good grades. Your GPA can sometimes help your chances of securing a loan if the lender has a program that rewards academic excellence.
Step 3: Have an income. Although you’re busy studying, an income that shows the lender you’ll be able to manage a car payment on top of rent and other expenses is super important with certain lenders. Not all lenders require you to report income to obtain a student car loan, but even if they don’t, make sure a car payment is within your current (honest) budget. The goal is to buy a car and add to your credit score, not damage it with unpaid loans you simply can’t manage. And don’t forget to include insurance and fuel and maintenance costs in the budget.
Step 4: If your budget allows for a loan-assisted car purchase in Toronto or Mississauga, you’ll also want to check your credit score in advance of submitting the loan application. Equifax and Transunion are the top credit bureaus in Canada, and they can provide you with your up-to-date score. Most lenders expect to see some sort of credit history on your file. Younger applicants may lack an established credit history, and a co-signer will likely be required for a car loan.
Step 5: Do some research and determine which car you’d like to buy. Used cars can often seem cheaper, but many new cars come with built-in maintenance programs, solid warranties and so on. Compare the cost of a used versus new car before making your final budget and submitting your application. Some cars are also more expensive to insure; factor that in as well.
Step 6: Visit a bank. Pre-approval can really smooth the way. Mention your student status up front in case the bank offers special programs. The bank will require a Social Insurance Number, identification, and in some cases, information about your employer and your monthly income.
Step 7: Hit the dealership. You can actually do this before visiting a bank or submitting a loan application. Many dealerships have solid relationships with lenders, and they can walk you through the loan application, too. You will still need a SIN number and identification, proof of income and so on.
Step 8: Shop around. Don’t buy the first car a salesperson shows you. Ask specific questions about the loan programs available at each lot. Banks and dealerships are often in competition for loans, and you’ll want to make sure you get the very best rates and terms for your needs. Make sure the loan limits (upper and lower) reflect the car you have chosen. Ask about down payments. In some cases, a larger down payment can allow for lower interest rates. More flexibility on the down payment can also mean lower up-front costs if that works best for your situation. Find out what’s on offer before you commit.
Step 9: Negotiating the terms of your loan is obviously a very important stage of the process. Ask about interest discounts, especially those tied to rewarding academic excellence. Your lender may have a relationship with your academic institution; be sure to mention your school and ask about such perks. Find out about loan term flexibility and whether or not you can get an extension that lowers monthly payments. Keep in mind that if you go that route, you’ll end up paying more for the car over a longer period of time. If you have to go with this approach, work to get the lowest possible interest rate. Lastly, see if the lender offers automatic payment discounts. Seemingly small discounts can add up.
Step 10: Patience. Another option is to wait until you qualify for a grad loan. If the terms you’re encountering just don’t work, or if you have difficulty qualifying for or affording a car payment as a full-time student, many lenders have grad loans. These are often accessible to those with a limited credit history. It is never a great idea to acquire a traditional student loan for the purposes of buying a car. Many student loans specify what the funds can be spent on, and the interest rates are usually much higher. You can find a co-signer for your car loan, but it’s really only best to do so when you have the capability to keep up with payments and honour not only the loan, but your co-signer’s trust in you.