Does Having Student Loan Debt Affect Car Loan Approval?
Yes, student loan debt can impact your ability to get car finance, but it doesn’t automatically mean rejection. Lenders assess your debt-to-income ratio (DTI), credit score, and repayment history to determine whether you can afford a car loan.
In Australia, student loans are usually in the form of HECS-HELP (Higher Education Loan Program) or private student loans. Here’s how they can impact your car loan application:
- HECS-HELP repayments are deducted from your salary once you earn above the threshold ($51,550 for 2023–24).
- Private student loans affect your credit report and are considered active debts by lenders.
- A high DTI can limit your borrowing power, reducing the amount a lender is willing to approve.
While student debt plays a role in car finance approval, you can still get a car loan with the right financial strategy.
🔍 How Lenders Assess Car Loan Applications with Student Debt
| Factor | Why It Affects Approval | How to Improve Chances |
|---|---|---|
| 📉 Debt-to-Income Ratio (DTI) | If student debt reduces your disposable income, lenders may hesitate to approve a loan. | Lower your DTI by paying off other debts before applying. |
| 💰 HECS-HELP Repayments | These automatically reduce your take-home salary, affecting affordability. | Show lenders stable income and the ability to make repayments. |
| 🚗 Private Student Loans | Appear on your credit report and affect your credit score. | Ensure on-time payments and reduce other debts before applying. |
| 🏦 Loan Amount & Affordability | Lenders may offer a lower loan amount if student debt is high. | Apply for a smaller car loan or increase your deposit to offset risk. |
✅ How to Improve Car Loan Approval Chances with Student Loan Debt
If you have HECS-HELP or private student debt, follow these steps to increase your approval chances:
1️⃣ Check Your Credit Report – If you have a private student loan, ensure your credit report is accurate and up to date (check with Equifax, Experian, or illion).
2️⃣ Lower Your Debt-to-Income Ratio (DTI) – Reduce other debts, such as credit cards or personal loans, before applying.
3️⃣ Show Stable Employment & Income – If you’re in a full-time job with steady income, lenders are more likely to approve your loan.
4️⃣ Apply for a Smaller Loan or Increase Your Deposit – A higher deposit reduces lender risk and increases approval chances.
5️⃣ Consider a Co-Signer or Guarantor – If your student debt is high, a co-signer with good credit can improve your application.
6️⃣ Work with a Finance Broker – Brokers can find lenders who are more flexible with student loan borrowers.
🚨 What If Your Car Loan Application Is Declined Due to Student Debt?
If your car loan is rejected because of student loan debt, try these solutions:
✅ Wait & Reduce Your Debt First – Pay down some of your student loan or other debts before reapplying.
✅ Look for Specialist Lenders – Some lenders offer car loans tailored for students or recent graduates.
✅ Apply for a Lower Loan Amount – Opt for a cheaper car to improve your approval chances.
✅ Use a Guarantor – A financially strong co-signer can help secure approval.
✅ Consult a Finance Broker – A broker can help you find the right lender based on your student debt situation.
🚀 How a Finance Broker Can Help If You Have Student Loan Debt
A finance broker can help you get car finance with student loan debt by:
✅ Finding Lenders That Accept HECS-HELP Borrowers – Some lenders adjust DTI calculations for student loans.
✅ Helping You Reduce Your Debt Impact – Brokers assist in structuring your application to improve approval chances.
✅ Negotiating Better Loan Terms – They help secure lower interest rates and repayment flexibility.
🔑 Final Thoughts
Having student loan debt doesn’t mean you can’t get car finance, but it may affect your borrowing power. By lowering your DTI, increasing your deposit, and working with a finance broker, you can boost your approval chances and secure a car loan.
🚗 Need car finance but have student debt? Take the right steps today to improve your chances!
DISCLAIMER
The information provided on this website is general in nature only and has been prepared without considering your financial needs, circumstances and objectives and should NOT be construed as financial, taxation or legal advice. For more information, get in touch with our experienced partner brokers today.
