Auto loan options for high school students can be limited depending on your age and income. Here are few things that you need to keep in mind.
Students under 18
No person under the age of 18 can enter into a legal contract unless they have been declared an emancipated youth by a court. That means that no lender can directly offer you a loan unless you meet those legal requirements. When you are under 18, you only have one main way to get an auto loan: have an adult obtain the loan for you. Unfortunately, this means that your credit will not benefit from the on-time payments and it will still appear as if you have no credit history. If you fail to make your payments, you will be hurting the loan-holder’s credit, which is a grave responsibility. All in all, this can lead to many problems in terms both financially and relationship-wise.
High-Schoolers 18 or Over
Once you are 18 or over, you will have a few auto loan options. The first is to obtain an auto loan on your own. Since you will lack a credit history, you may find this difficult, which leads us to your second option: a co-signer. A co-signer is usually a parent or other relative who has a solid credit score. By co-signing the loan, they are assuming responsibility for repayment if you, as the primary borrower, are unable or unwilling to make your payments on time or at all. Their credit is on the line, the same as ours. Your potential co-signer must met the lenders guidelines before they are able to assist you with a loan.
Those guidelines usually include:
- Time on job…two years.
- Time at residence…again, two years.
- Monthly income before taxes…depends on lender, usually $1,400 minimum.
- Credit score/profile…540 or above. Should have four paid as agreed lines of credit, one being an installment loan with twelve on-time payments of $150 or more.
- Total debt to income including new payment…most lenders look for less than 36 percent, but some specialty lenders may stretch that to 45 percent.
- Additionally, a lender may require a few other things such as the vehicle: having a loan to value (LTV) ratio between 85 and 115 percent, be seven years old or newer, have less than 100,000 miles, and that you offer a down payment of ten percent or $1,000.
Although your options are limited as a high school student, you can still find the loan that you want. If you are having difficulty obtaining financing through traditional lenders, you may find the loan you need through an online specialty lender. Everyday we help people with minimal credit get approved for the financing they need. You can apply here. The right lender is out there, don’t give up.