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Why Students are Given First Time Auto Loans

Nowadays, a number of students (particularly if they are attending a college or university) require a vehicle so that they can navigate from one place to another – from tuition to home, home to work and back etc. To get the vehicle, there are a number of lending institutions which provide them with an auto loan. Many wonder as to why these lenders give them the finances as these students don’t have any credit history or reliability. However, there is profit in this for both the lender as well as the student. For the student, he/she not only gets the car for commute, he/she also gets the opportunity to have a positive credit history.

When a student applies for an auto loan, he/she doesn’t have any history which can state that they were able to pay their previous bills on time. However, now they have a record for the future which states that they were regular in paying back their loan payments. It enables them to get loans for other things in the future, for example a house. Even before employment, they are forming a positive credit rating.

In the case of the lenders, some of them demand that there should be some co-signer to assure that the loan would be repaid. However, many are leaving this clause out and include the stipulation in first time auto loan that if the payments are not made on time, then the lender can take away the vehicle. They know that one way or the other, their investment is going to return.

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