International Students: Car Loan Options In The Usa

International students in the USA often rely on public transportation, but this can be expensive and unreliable. A car can be a necessity, offering convenience, freedom, and the ability to explore. While it may seem daunting, international students can get car loans in the USA, although the process is more complex than for US citizens or permanent residents. This is because lenders in the USA typically require a credit history and a social security number, which international students often don't have. However, some lenders specialize in working with international students and foreign nationals, and there are several steps that international students can take to secure a car loan.

Lenders' requirements for international students

International students in the USA can indeed get car loans, but the process is more complex than for local students. Lenders have specific requirements that international students must meet to secure a car loan. Here are the key lenders' requirements for international students:

Valid Student Visa and Legal Status:

Maintaining a valid student visa and legal status throughout the loan term is crucial. Lenders will request copies of your visa and immigration documents to verify your eligibility. Your visa should cover the loan duration, assuring the lender of your legal right to stay and repay the loan.

Proof of Enrollment:

Lenders require official documentation confirming your enrollment in a US educational institution. An acceptance letter or enrollment certificate is necessary to initiate the loan process.

Proof of Address and Residence:

You will need to provide documentation verifying your current address and residence in the USA. This can include utility bills, rental agreements, or official mail.

Income Verification:

Lenders will ask for proof of income or financial backing. Compile documents such as pay stubs, employment contracts, scholarship letters, or letters from sponsors to demonstrate your ability to repay the loan.

Credit History and Creditworthiness:

Building a positive credit history in the USA is essential for securing a car loan. Lenders use credit history to assess your creditworthiness and the associated risk. Some lenders may be lenient and consider applicants with limited credit history, while others may require a co-signer with good credit history.

Down Payment and Collateral:

International students should be prepared to make a down payment when applying for a car loan. The amount may vary depending on the lender's policies and your creditworthiness. Collateral, such as a vehicle or other assets, may also be required to secure the loan.

Insurance:

In the US, car insurance is mandatory for every driver. Lenders may require proof of insurance or encourage you to include insurance coverage in your loan application.

Co-signer:

A co-signer with good credit history and permanent US residency can significantly strengthen your loan application. The co-signer becomes legally obligated to repay the loan if you default.

Alternative Financing Options:

Consider working with expat car financing companies or exploring online lenders that cater specifically to international students. Dealership financing and alternative financing options can provide convenient and user-friendly solutions.

It is important to carefully evaluate your financial situation and compare different lenders' requirements and loan terms before committing to a car loan as an international student in the USA.

Documentation needed

As an international student in the USA, you can get a car loan, but it is more complex than a local student loan. While some international students have the funds to purchase a car outright, most do not. There are not many financial institutions in the US that will provide an auto loan for international students, and the required documents will vary from institution to institution and from state to state.

• Identification documents: This includes your passport, student visa, and any other relevant IDs. Your visa should cover the duration of the loan to assure the lender that you have the legal right to stay in the country and repay the loan.
• Proof of enrollment: Lenders will require official documentation confirming your enrollment status in a US educational institution. An acceptance letter or enrollment certificate will be necessary.
• Proof of address and residence: Utility bills, rental agreements, or official mail can be used as proof.
• Proof of income: You may be asked to provide documents supporting your income or financial backing, such as recent pay stubs, employment contracts, scholarship award letters, or letters from sponsors.
• Finance qualification form: This form requires information about your employment, living, and financial situation.
• Employment letter: This should confirm your employment, salary, benefits, and terms of employment.
• Proof of lawful presence: This includes your visa, a green card, driver's license, EAD card, or other documents.
• Down payment: International students should be prepared to make a down payment when applying for a car loan. The amount may vary depending on the lender's policies and your creditworthiness.
• Co-signer: A co-signer with a good credit history can strengthen your loan application as they become equally responsible for the loan.
• Credit history: Some lenders may be lenient and consider applicants with limited credit history, while others might require additional measures.
• Driving license: You will need to have a driving license, whether international or local. If you don't have a license, you can apply for one, but you must take driving lessons first.
• Auto insurance: In the US, it is required for every car driver to have auto insurance.

Credit history and co-signers

Credit history is a significant factor in securing a car loan in the US. Most traditional auto lenders require a credit history and a Social Security number, which can be challenging for international students to provide. However, some lenders understand that international students may not have a US credit history and are willing to make exceptions. There are also lenders that specialise in working with individuals with limited or no credit history.

International students can build a credit history in the US by applying for a secured credit card, which requires a security deposit and helps establish a positive credit record. Using a credit-builder loan from specific banks and credit unions can also help build credit. Consistently paying bills, such as rent and utilities, on time, will also contribute to a positive credit history.

Alternatively, some lenders may require a co-signer with sufficient income and credit history. A co-signer is someone who signs a loan with you and agrees to be responsible for the loan if you cannot make the payments. Having a co-signer with good credit can increase your chances of getting approved for a loan and may result in a lower interest rate. However, it is important to note that not all lenders accept co-signers, and it is essential to ask about their policies before applying.

Leasing and purchasing companies

International students in the US can consider working with expat car financing, leasing, and purchasing companies to secure a vehicle. These companies offer financing programs with low rates and flexible monthly payments. Some companies that international students can consider approaching include Auto Bandit, International AutoSource, and Boro.

Auto Bandit assists international students in leasing a car in the US. The company helps students find suitable leasing options and guides them on building their credit history. International students can apply for a secured credit card, make small purchases, and pay off the balance in full and on time each month to gradually improve their credit score and increase their eligibility for car leases.

International AutoSource, a partner of RelocateUSA, is another company that provides auto financing, leasing, and purchasing services for expats and foreign nationals. The company offers special pricing and financing options with flexible monthly payments.

Boro is another company that helps international students obtain personal or auto loans with an easy repayment method.

When considering leasing options, international students should evaluate lease-end options such as lease buyout, lease extension, or returning the vehicle. It is also important to be aware of any excess wear and tear, damages, or maintenance issues to avoid additional charges.

To secure a lease, international students may be required to provide a larger security deposit, proof of residence, an international driver's license, and auto insurance coverage.

Overall, working with leasing and purchasing companies can provide international students with specialized support and guidance in obtaining a vehicle during their studies in the US.

Auto insurance

As an international student in the USA, you must have auto insurance to drive. While you may not have a driving record in the US, you can build a clean record over time. Some insurance companies will consider your driving history in your home country, so it is beneficial to have several years of driving experience.

There are several options for purchasing auto insurance as an international student in the US. Most insurance companies offer car insurance for tourists, visitors, and short-term students, but you will need a valid driver's license. Depending on your home country, your original license may be accepted, or you can apply for an International Driving Permit (IDP). Standard policy terms are typically six or twelve months, but some insurers offer temporary and shorter policies. If you are renting a car, you can purchase rental car insurance from the rental company, which will be valid for your rental term. This is the easiest car insurance option for tourists in the USA.

If you are a student in the US with a foreign driver's license, you can purchase an auto insurance policy in any state. You must carry at least the minimum car insurance required by the state in which you reside before driving. If you are relocating from Canada to the US, you will need to register your car with the BMV or DMV in the state where you will be living. Once you have done that, you can purchase car insurance in the US and start the process of transferring your Canadian license to a US driver's license.

If you are working with an IDP, you will need to find an insurer that accepts foreign drivers, such as State Farm or Farmers. If you have a US license, you can compare auto insurance quotes from many providers. To keep your monthly insurance affordable, there are discounts available, including ones for getting good grades, being a defensive driver, and consistently wearing your seat belt while driving. Remember to ask insurers about their discounts when shopping for affordable student car insurance.

As an international student, it can be difficult to get a US credit card if you don't have enough credit history. However, if you have a credit card, you can use it to make payments on your car, although this can incur additional "credit card handling fees". Social lending, or peer-to-peer loans, offer a non-traditional borrowing option with lower rates than traditional lenders. This option may require a credit check but provides another opportunity for funding a vehicle.

Frequently asked questions