Owning a car during college days is a reality for some students who may have had parental help in buying one. For other students owning their own car may appear to be a financial impossibility. Already aware of the student loans they have just signed for, owning a car may well appear to be an impossibility while studying. Many students have part time work to balance with studies and already face a frugal time until graduation, trying to stretch student loans to cover tuition, living costs and text books.
Even though a car my be just a dream, sub prime lenders are willing to target students with advertising geared directly at students who are not best placed to be taking on more financial commitments. No credit and bad credit deals are now available on line, directly from the lenders themselves or from broker’s who represent sub prime lenders. Auto loans aimed at students promise no co-signer necessary for those with no credit, something which traditional financial institutions would rarely consider.
Sub prime lenders are willing to offer auto loans with no down payment required and long repayment terms. They make it too easy for young students to have what they cannot actually afford and could well lead them into debt, making it more difficult for them to move out of the sub prime lending arena later on. Traditional lenders will close their doors to students who prove fiscally irresponsible during college days yet sub prime lenders are clearly counting on the student’s financial naivety.
By targeting students that are clearly not in a position to take on the extra monthly repayments the sub prime lenders are drawing in youngsters not used to dealing with finance. If they fail to meet the payments when due, their credit history will be soured before it is even established, and all for nothing when the car is repossessed.
If students do feel the necessity to take on an auto loan whilst in college it is far better if they stay clear of sub prime lenders and deal directly with reputable dealers or finance institutions. These will more typically explain that a down payment is made to reduce the overall cost of borrowing, and that a co-signer is recommended if the student has no credit. They should advise of the implications of taking a long term loan as opposed to a shorter term loan, and how it will affect the total amount repaid.
Students considering auto loans should carefully consider the lender they choose and understand that deals which seem too good to be true often are. It pays to research the lender and if their primary business is providing bad credit loans then move on, and take advice from the college financial aid officers as to reputable lenders. It may mean putting the dream of a car on hold but it teaches an excellent lesson about not living beyond ones means to avoid future debt.