Will Student Debt Hurt My Ability To Finance A Used Car?

Automotive Finance, Credit Education, Used Cars

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According to the Canadian Federation of Students, the average Canadian student has debts that exceed $27,000. Most are coming out of school and needing the essentials, like a car, to live on their own. If you are a recent graduate carrying a substantial amount of student loan debt and wondering if you can still finance a used car, the answer is “Yes.”

Many young Canadians are entering the workforce to find that their monthly student loan payment is higher than they had anticipated and paying it might not even be doable with their starting salary. It’s a recipe for disaster, because being unable to pay your loans, or paying them late, can significantly impact your credit score. Since your ability to finance a used car from Ride Time is partially dependent on your credit rating, that might pose a problem — but that doesn’t mean that it isn’t possible to buy a used car.

The advantages and disadvantages of having student loan debt for a used car loan

If you have a student loan and you have paid it on time and without fail, then the good news is that it most likely will not hinder your ability to borrow money; it can actually be an asset. One of the factors that lenders use to determine if they can lend you money, and what interest rate they will require, is your credit history. Often, young people can’t borrow because they lack any credit history. If you have taken out a student loan and established that you pay it back when you are supposed to, then your student loan might actually help get you the financing you need.

In reverse, if you haven’t been able to make your payments, that can significantly affect your overall rating and make you a bigger risk for lenders. That might prevent you from getting a loan or make the lenders offer you a higher interest rate, which will impact your monthly payments and your overall purchasing price. Also, when deciding to loan money, lenders use a “debt-to-income” ratio. That means that they examine how much you owe and how much you have coming in to determine how much you can pay per month.

Things you can do to help get a car loan even with student loan debt

If you want to get a used-car loan, there are things that you can do to increase the likelihood. The first is to pay your student loan on time, every month, without fail. If you are having a hard time doing so, then you can reach out to the student loan lender and ask for a forbearance or deferment. If you qualify, there is a good chance that you can either lower your monthly payments or get your loan reduced.


If you don’t qualify for either a forbearance or deferment, then try to make a different arrangement for repayment. If you can lower your monthly costs, then it will increase your credit score, and you are more likely to get your loan approved.

Also, if you have any other debts like a revolving credit card balance, take steps to minimize the balance by putting as much as you can into paying it down. If you can pay down the balance, it will increase your credit rating, even if you have a high amount of student loan debt.

What if I don’t get approved?

If you are unable to get you the financing you want to get you into a used car today, there are other options. If you start moving in the right financial direction and take steps to increase your credit score, it shouldn’t be too long before you can qualify. You might also want to consider finding a cosigner.

A cosigner is someone with good credit — maybe a close relative or family member. Just be cautious: if you have someone cosign, and then you don’t make payments or are late on the payments, their credit score will take a hit too.

If all else fails, take some time to save for a down payment. If you have some money to put down towards a used car, then you are more likely to get a loan. Just know that whatever our team at Ride Time can do to help with your financing needs, we will. We’re always going the extra mile — open a dialogue with us today to see what options might be available.

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