Indy Auto Man
Indy Auto Man
Closed. Opens Monday at 9:00 AM
Closed. Opens Monday at 9:00 AM

Car Loan for Students in Indiana: How to Qualify?

car loan for students in Indiana, Ohio, Kentucky, Illinois

For most car buyers, a good credit history and a stable income are keys to getting approved for a car loan. However, both are things that students have to struggle with. Today, we prepared a guide on how to get a car loan for students at the best terms.

Indy Auto Man is partnering with 24 banks and credit unions and strives to secure attractive rates for students of the University of Indianapolis, IvyTech Indianapolis, Indiana University in Bloomington, and other local institutions. Start your journey for your first vehicle right now!

Basics of Car Loans for Students

Every car loan is different, but most have the same characteristics in their basis. Auto loans are typically repaid monthly over a period, often from two to six years.

If the interest rate is fixed, your monthly payment and interest rate will remain for the loan lifespan. This means the amount will be the same until you repay the loan. If the interest rate is variable (which is not common), the interest rate and monthly payment may change periodically or even increase several times.

If you fail to pay the fee in due time, your vehicle may be impounded because most car loans are secured - the collateral is the car itself.

Most lenders will check your credit and employment history, as well as other debts, to determine whether you can pay the money back to the financial organization, which means for your credit to be approved. It can be tricky for college students to meet standard financial requirements, but it is possible, especially when you come to a well-reputed dealership.

Can you get a car with student loans?

Unfortunately, student loans can be used only for educational purposes and are not intended for buying a car. The U.S. Department of Education prohibits the inclusion of the car value in the college’s cost of attendance. It may only include costs for maintaining and operating the transport, meaning reimbursement for travel expenses from home to college. 

Difficulties a Student May Face When Getting a Car Loan

student loan difficulties

As usual, college students are just starting their way to financial independence. So, it can be hard to qualify for both a traditional car loan and a student car loan. Here are some obstacles you may encounter during the application process:

Limited Income

Although some college attendants work full-time, most students have irregular or no income. However, your ability to repay the loan is one of the core factors banks consider when approving a student’s credit.  

Bad Credit

Before financial institutions approve your loan, they need to ensure you will repay it on time. That's why lenders consider many factors, including your credit history. And since most lenders check your credit when making decisions, it's a good idea to know your creditworthiness before applying.

Financial organizations and credit unions may be less likely to approve your traditional auto loan application if you've never used credit before or don't have enough credit to establish a consistent payment history.

International students face the problem most often because their credit history is in another country, and this information is not available in the United States.

The good news is that some student car loans are designed for those with limited credit history. Instead, some lenders may focus on other factors, such as employment and GPA. Banks also offer loans for international students who can order a credit card from another country and pick it up upon arrival.

High-Interest Rates

To qualify for the lowest interest rates applicants should have a high credit score and a good credit history. If your credit history is limited or in poor condition, you may not be eligible. And if you qualify, the interest rates on your loans may rise. When you finance a car with Indy Auto Man, Indianapolis, we look for lenders that offer discounts for students or maintain a certain GPA. This will help you save on interest costs.

Maximum Loan Amount

Some lenders place a limit on the loan amount. The maximum for a student is about $15,000 - $20,000, which may limit the type of car you can buy unless you have saved up a significant down payment. 

Fortunately, the range of reliable used vehicles under 20K is quite extensive. 

Additional Car Loan Requirements for International Students

Lenders who work with international students may have additional requirements, such as: 

  1. Residency requirements. As an international student, you will have to provide your proof of residency. Most banks accept OPT, F-1, H-1B, L-1, O-1, TN, or green cards.
  2. Repayment time frame. A lender won't approve you for a car loan if the payment term extends past your legal stay in the U.S.
  3. Resident co-signer. Some banks require a co-signer to be a permanent U.S. resident.

If you’re not sure whether you can get a car loan in Indiana, try to get pre-qualified in advance

How a Student Can Increase Chances For Getting Approved For a Car Loan

how a student can increase chances for a loan in Indiana

It may be difficult for a student to qualify for an auto loan, but there are things you can do to increase your chances.

Build your credit

 Even if you plan to leave the country and sell your car after graduation, it is vital to build a credit history. Financial institutions offer credit-building loans and secured credit cards designed to help people repair their scores. The three major credit bureaus receive data about payments on these loans each month.

Consistent on-time payments can help you construct a positive lending pattern and increase your chances of getting approved for a car loan in the future.

Becoming an authorized user of your friend's or parent's credit card can also help you get credit. However, it is always worth checking whether a card issuer communicates information about Authorized Users to credit bureaus. 

Note. This can only help if the cardholder stays below their credit limit and makes payments on time.

Consider the co-signer

If you don't qualify for a car loan as a student, having a co-signer may help you get one. A co-signer is a person who will repay the loan if you are unable to do so. This means his or her reputation is at stake as much as yours. Most often, students choose parents to act as their co-signers.

Get good grades

Some student loan lenders offer reduced interest rates if you maintain your grades. However, other lenders may check your GPA when reviewing your loan application.

Save for a down payment

The more money you save for a car down payment, the less you will need to borrow to purchase a vehicle. Starting with a smaller loan may result in lower monthly payments. Additionally, some student loan lenders require a minimum down payment ranging from 10% to 25% of the car purchasing cost.

Provide a stable source of income

Even if you have a good credit history and solid downpayment, lenders won't give you a loan if you can't afford it. Lenders want to make sure you earn enough money to repay your credit on time and meet other obligations.

Finance a Used Car at a Dealership

finance a used car at a dealership in Indiana

Financing a used vehicle at a dealership is a way to lower your monthly payment and get a stress-free car-buying experience. A well-maintained auto from a reliable dealer will safely get you to and from work and college, and you won’t have to pay a fortune for it. If your financial situation changes, you can upgrade to a higher level any time, plus benefit from trade-in offers and discounts.

If you are looking for a reliable and affordable used vehicle near Indianapolis, browse the Indy Auto Man inventory! We offer advantageous financing options for students and free car shipping within a 250-mile range, which includes Indiana, Ohio, Kentucky, and Illinois.