The flexibility to get to class or the library by car without getting stuck on crowded buses and trains – that’s the dream of many students. Unfortunately, a student’s tight budget simply does not allow for the purchase of his or her own vehicle. Even if gasoline and car insurance were affordable, the purchase cost is often an insurmountable hurdle. Nevertheless, students don’t have to give up their dream of owning a car altogether. There are possibilities that make the purchase of a car through a favorable financing still within reach.
Financing a car in the middle of your studies? No problem!
The days of making major purchases from equity alone are actually over. Whether in furniture stores, electronics stores or car dealerships, financing is the order of the day.
Favorable interest rates make an installment purchase particularly attractive. For a small additional charge, the customer can comfortably pay off the total amount in several installments. This means that the required sum does not have to be available in full at the time of purchase. In this way, it is possible to fulfill a heart’s desire despite the lack of equity capital or to keep the corresponding cash amount as an iron reserve on the high side.
A loan is also a form of installment purchase, even if the desired purchase is paid for in one amount here. The loan can in turn be repaid to the bank in installments.
For students with a tight budget, the principle of financing seems to be made for them. Unfortunately, this option is not always open to you. When making major purchases, dealers require certain guarantees that they will receive their money even in the event of non-payment.
Since students seldom have large assets, this is one thing with the certainties. In addition, when granting loans, most banks and credit institutions often require a garnishable income that exceeds a limit of 1.000 euro per month should not be less.
Since students’ sources of income, such as student loans, child support or alimony, do not count as garnishable income, they are often at a disadvantage here as well.
So far, so bad, but there is also good news: students can finance a car despite limited financial resources, if they make the right use of their options. Because of their special status, you can usually fall back on 5 options for financing your car:
1. exhausting student loans
In addition to bafog, student loans and special loans for students, for example through the kfw bank, are among the most frequently used offers that young people use to finance their studies.
Students who take out this type of loan as part of their studies receive a monthly payment of between 100 and 650 euros, which can be agreed flexibly. The education loan can be applied for the first and second degree as well as for postgraduate studies and doctoral studies. The criteria that banks apply for the approval of such a loan are much more student-friendly than a regular loan at a bank.
The big advantage for car financing: the student loan can often be combined with a financing loan for the car. Since the loan paid out as part of a student loan does not have to be repaid until after graduation, it is also possible for students to combine repayment with repayment of the car loan.
This means that the money does not have to be returned until the monthly budget has become much more relaxed due to a move into working life.
If you would like to combine your student loan with car financing, you should contact your local bank to find out how the loan can also be used for such a purchase.
2. A car loan with guarantors
A classic car loan is also possible for students, but usually only through a guarantor. This means that the student does not apply for the loan alone, but presents a co-applicant to the bank. Parents are often eligible for the loan. The co-applicant must be a person who meets the criteria set by the bank for a loan to be granted. This means that either an attachable income in a sufficient amount is available or appropriate securities can be offered.
The co-applicant can either be included in the loan agreement as a second borrower or only act as a guarantor. In both cases, this means that the student, as the primary applicant, is responsible for paying the monthly loan installments. Only in the event of a default, the bank would contact the co-applicant or guarantor and claim the outstanding payments from him/her.
3. Lease a car
With car leasing, the vehicle is not purchased from the outset. The student pays a monthly installment for a contractually agreed period of time, which only covers the actual useful value of the vehicle.
Leasing installments are therefore usually significantly cheaper than purchase installments. At the end of the agreed contract period, the vehicle can either be returned without any further costs, can continue to be leased through a connected leasing contract or can be purchased at its current residual value.
A leasing contract can usually be adapted very flexibly to your own possibilities and needs and is often coupled with a favorable maintenance and repair contract, which can also take some of the edge off the often expensive car repairs and inspection costs.
4. A personal loan with relatives and friends
A loan with particularly favorable conditions is usually available in the private sector. If you do not have the necessary equity capital, you may be able to ask your family or better-off friends for a private loan.
Particularly among family members, such loans are often granted without interest or at very low interest rates. Lenders from the private sector are usually not as strict about repayment as banks and will even turn a blind eye if the budget is no longer sufficient for the planned installment in one month or another.
In order for everyone to feel comfortable with the agreement, however, the key dates for the personal loan should still be put in writing. This reduces the risk of disputes developing over the vexed issue of money. Incidentally, the situation is similar when z.B. Your parents stand in for you with the car insurance.
5. Use a life insurance policy
Although the reputation of life insurance has suffered greatly in recent years, there are still many young people today who already have. In the event of a loan application, an investment such as a life insurance policy or even a building savings contract can prove to be a real stroke of luck. In fact, it is often possible to offer such contracts to the bank as collateral for the granting of a loan.
The contract itself can continue to run as normal with the insurance company. the bank will only be granted the right to access the capital saved in the contract in the event of the borrower’s insolvency. Once the loan has been repaid in full, the bank’s claim expires and the student is once again free to dispose of his or her contracts and the contributions and interest income saved in the meantime.
Conclusion: students who are dependent on their own car should exhaust all possibilities when it comes to financing. Even without the necessary equity, a mobile vehicle need not remain a dream.