Financing A Car: International Student's Guide To Vehicle Loans

As an international student, you may not have the same financing options as your peers. However, there are lenders who will lend to non-US citizens, and some companies even specialize in helping international students get auto loans. To get an auto loan as an international student, you will need to provide specific documentation, including a finance qualification form, proof of lawful residence, and an employment letter. You may also need to meet certain requirements, such as having a valid visa and proof of income. It is also important to understand the terms and conditions of the loan, including interest rates, repayment schedules, and any associated fees.

Can I finance a car as an international student?

International student car loans

International students can get car loans, but the process is more complex than for local students. The requirements and restrictions will vary depending on the lender and the country. For example, in the US, international students can get car loans from some financial institutions and car manufacturers' financial arms, but not all. In Canada, international students can also get car loans, but they need a Social Insurance Number (SIN) to make any big-ticket purchases, including buying a car.

In the US, lenders may require a cosigner if the loan applicant is not a US citizen. Some companies have special programs that do not require a cosigner. The cosigner must be a permanent US resident or have been living in the country for two years with a stable job and regular income. Lenders may also consider other factors, such as the applicant's visa status, income, and credit history. International students may not have any credit history or social security number, but lenders may still check their credit file for any negative remarks. To build a credit history, international students can apply for a secured credit card or use a credit-builder loan from some banks and credit unions.

Some lenders may offer international students car loans with unique requirements, such as a shorter repayment period that does not exceed the applicant's legal stay in the country. In addition, international students may need to provide specific documentation, including a driver's license, auto insurance, finance qualification form, visa, employment letter, payment documents, and proof of lawful presence.

It is important to note that the process of getting a car loan as an international student can be lengthy and challenging. International students should carefully consider their options and compare the requirements and restrictions of different lenders before applying for a car loan.

Required documents

As an international student, you will need to provide specific documents to apply for a car loan. These requirements vary across institutions and states, so it is best to collect everything and check with your local Department of Motor Vehicles (DMV) office before applying. Here is a list of documents you may need:

• Visa: This is the most common and accepted form of identification for international students. Ensure your visa is valid and covers the duration of the loan.
• Passport: Bring your passport as proof of identity.
• Finance Qualification Form: This form provides information about your employment, living situation, and financial status.
• Proof of Lawful Presence or Residence: Depending on your situation, you may need to provide proof of lawful residence. This could include a driver's license, EAD card, visa, or a green card.
• Employment Letter: If applicable, obtain a letter from your employer confirming your employment status, salary, benefits, and terms of employment.
• Payment Documents: Gather documents that show your monthly costs and ability to repay the loan, such as bank statements, tuition fees, rent, utilities, insurance, etc.
• Credit History: While not all lenders require this, some may ask for your credit history or a co-signer with good credit history.
• Driver's License: You will need to prove that you can legally drive. If you don't have a local license, you may need to take a driving test or apply for a license in the country where you are studying.
• Auto Insurance: In some countries, such as the US, auto insurance is mandatory for all drivers and is required to get a loan.
• Social Security Number: While not always required, some lenders may ask for this. If you don't have one, you may need to fill out Form SSA-L676.
• Enrollment Status: Lenders may request documentation confirming your enrollment at a local educational institution, such as an acceptance letter or enrollment certificate.
• Proof of Income: Demonstrate your financial capability and ability to repay the loan through pay stubs, employment contracts, scholarship award letters, or letters from sponsors.

Lender options

Traditional Banks and Credit Unions

Traditional banks and credit unions are a common source of car loans for international students. Some banks may be more open to providing auto loans to international students than others. It is worth exploring different banks and comparing their requirements and loan terms. Some banks may have special programs for international students, making the application process more accessible.

Online Lenders and Alternative Financing Options

Numerous online lenders specifically cater to international students, offering user-friendly financing solutions. These lenders often have experience working with international students and understanding their unique financial situations. They may consider factors beyond credit history, such as academic and personal information, to determine loan approval.

Dealership Financing

Some car dealerships offer in-house financing options designed for international students. Dealership financing can be convenient, but it is essential to carefully review the terms and conditions, interest rates, and any additional costs associated with this option.

Companies Specializing in International Student Loans

Companies like Stilt are specifically designed to help non-US citizens acquire low-interest loans. They understand the challenges faced by international students in obtaining loans without a credit score and can automate much of the loan process.

Co-Signer

If you are hesitant to get a co-signer, some lenders may offer alternative solutions. However, a co-signer with a good credit history can strengthen your loan application. The co-signer must be a permanent resident or have lived in the country for a certain period with a stable job and regular income.

It is important to note that lender requirements may vary, and it is always a good idea to shop around and compare loan offers from different institutions. Additionally, consulting with a financial advisor or the international student office at your university can provide valuable guidance in navigating lender options and the car loan application process.

Credit history and co-signers

As an international student, you may face challenges in securing auto financing due to a lack of credit history in the United States. This is where the concept of a co-signer comes into play. A co-signer is typically someone with a solid credit history and stable income who agrees to share financial responsibility for the loan. Their role is to boost your credibility and provide assurance to the lender that the loan will be repaid.

When considering a co-signer, it is essential to understand the risks involved. The co-signer is not just a reference or a guarantor; they are legally bound to the loan. If you, as the primary borrower, fail to make timely payments or default on the loan, the co-signer is responsible for covering those payments. Late or missed payments can negatively impact the credit scores of both you and your co-signer, making it more difficult to obtain loans or credit cards in the future. Therefore, it is crucial to have honest and transparent discussions with your potential co-signer about the financial implications and risks involved.

While some lenders may focus on factors such as employment and academic performance, having a co-signer with a good credit score can significantly improve your chances of securing a loan. It demonstrates to the lender that there is a lower risk of default, as the co-signer provides additional financial assurance. This can be especially beneficial if you are an international student with a limited or non-existent credit history in the United States.

It is worth noting that not all lenders require a co-signer, and there are alternative options available. For instance, some financial institutions offer loans specifically designed for international students or individuals with limited credit history. These lenders may consider other factors, such as your employment status, income, and academic performance, rather than solely relying on your credit score. Additionally, companies like Nova Credit have partnered with financial institutions to provide auto loans to newcomers in the US without the need for a credit history or a co-signer.

Ultimately, the decision to use a co-signer or seek alternative financing options depends on your personal circumstances and preferences. If you choose to involve a co-signer, ensure that you fully understand the loan terms and potential risks, and always communicate openly with your co-signer to maintain a healthy financial partnership.

Interest rates and repayment plans

Interest rates for car loans can vary depending on the lender and your financial situation. Some lenders may offer lower interest rates to students enrolled in reputable universities, as it enhances their credibility and responsibility in the eyes of the lender. Additionally, having a co-signer with a good credit history can lead to more favorable loan terms, including a lower interest rate.

When it comes to repayment plans, most lenders will require you to make regular monthly payments. It is crucial to create a budget and plan to ensure you can meet the repayment schedule. Some lenders may offer special programs or flexible repayment terms for international students, so be sure to shop around and compare loan offers from different financial institutions.

To improve your chances of obtaining a car loan with favorable interest rates and repayment plans, you can consider the following:

• Building a credit history: While challenging for international students, you can start building credit by applying for a secured credit card, becoming an authorized user on someone else's credit card, or exploring credit-building loans designed for international students.
• Providing proof of income: Lenders will want to see that you have a source of income to repay the loan. This can include income from employment, scholarships, or financial support from family.
• Making a down payment: A larger down payment can improve your chances of approval and potentially lower the interest rate.
• Enrolling in a reputable university: Attending a well-regarded university can enhance your credibility and lead to better loan terms.
• Consulting with a financial advisor: Seeking guidance from a financial advisor or the international student office at your university can provide valuable insights into the car loan process and help you find the most suitable loan options.

Frequently asked questions