A step by step guide to understanding graduate finance and the selection criteria

Apart from moving out of your parents’ home, we’d say that purchasing a car is likely the next big financial decision you’ll make. As costly as it is, it allows you the freedom and independence every new graduate needs when entering the job market. While shopping around for financing, with no luck because of your low or non-existent credit score, you have probably heard about graduate finance.  Now, this isn’t a new term, but it sure can be for someone who has never “needed” to know about this financial term and its perks before. We’re here to help you understand graduate finance more, and inform you of the criteria you need in order for you to get car finance in South Africa as a graduate. 

What is graduate finance?

Graduate finance is a loan agreement for graduates who wish to buy a vehicle, but have no credit history. Lenders acknowledge that many graduates do not have a good credit score as they haven’t had the time to build it while they study. It is also unfair to expect recent graduates to apply and be vetted under the same criteria as someone who has built a good credit history over the years. So, graduate finance is an affordable car payment option that allows you to buy a car without a credit history. 

How to qualify for a graduate finance 

Although this is for all graduates seeking vehicle finance, there are graduate finance requirements you need to meet in order for you to get pre-selected for vehicle finance.  These include the following requirements:

• Be a recent graduate as the graduate finance car age is for anyone under the age of 31. 
• Prove that you have obtained your diploma or degree in the last three years. 
• Provide proof of employment or a letter of appointment if you haven’t started. 
• Earn at least more than R7000 per month. 
• Have the ability to afford your monthly repayments. You can use a car finance calculator online to see how much you can afford to spend on a vehicle. 

Documents you will need for graduate financing

Now that you know what the criterion is to qualify, you need to ensure that you have all of the documents you need, as it is a part of your car finance requirements, to ensure selection:

• A valid proof of address that has been certified in the last three months. 
• A copy of your identification document (ID). 
• A copy of your driver’s licence. 
• A signed employment letter and a recent payslip, or a signed employment contract if you haven’t started employment. 
• If you’ve been working at your current employer for longer than three months, lenders will need a copy of your recent payslip and three months bank statements.

The maximum finance term 

A finance term gives you manageable instalments that you pay on a monthly basis. This depends on how long you wish to pay for the vehicle and how much you can afford to pay per month. Most lenders offer a minimum of 6 months to a maximum of 96 months. But, you only qualify for 96 months for a brand new car. For a second-hand car, you will get a shorter finance term. Lenders will always offer you a payment term that will fit your budget; however, you need to be aware that the longer your payment term is, the more interest you will pay. So, always ensure that you choose a term that you are comfortable with and calculate the interest rate using a car finance calculator. 

Whether to put down a deposit or not 

Lenders do not require a deposit for your vehicle, but it can help you in the long run. A deposit will help you pay less than you would pay if you financed the entire price of the vehicle. But apart from you being able to pay less on the car, it does have additional benefits such as paying less on interest, lowering your borrowing costs and making you a favourable applicant to lenders. Being favourable is an effective way of getting selected for financing, especially for graduate finance.  It’s important to remember that you don’t have a credit score to show your trustworthiness and what kind of payer you are. But, a deposit can show lenders that you are good with your finances, and you are trustworthy. Also, keep in mind that the amount of money you receive from your car loan depends on your affordability. Having a deposit can also help you get the vehicle you want, even if you didn’t get the full auto loan cost from the financial service provider. 

How to ensure you get pre-selected for graduate financing 

Now that you have an understanding of what this entails, you need to ensure that you become an eligible applicant. To do that, you need to know a few things before you can apply for finance online. Those things include; what type of vehicle you’re interested in and the price of the car and whether you are purchasing a second-hand car or brand-new one. You also need to consider the additional costs of owning a car, such as; insurance, service and maintenance plans as well as petrol.  To cut down on costs and ensure that you pass the affordability check, it is in your best interest to opt for an affordable second-hand car. Being able to buy a car with no credit does not mean you can purchase your dream car as of yet. This financing is here to help you get a vehicle that is fit for your lifestyle. You can always work towards your dream car later in life. Checking and ensuring that your affordability is in good standing allows you to make necessary changes to your budget before you start your application. You want to appeal to lenders, so doing work prior is in your best interest. But to know how much you need, you, of course, need to shop around for the ideal car.  Finding the right vehicle won’t be easy, even in the second-hand market. But always check that you are comfortable with the price and check that the car has good mileage. Additionally, you’ll also want to find a vehicle that has a good fuel economy so that you can save money on petrol. 

Final thoughts 

Once you have shopped around and know for certain what you can afford, then you are on the road to owning your first car. This is an exciting yet overwhelming milestone that shows you that you’re entering adulthood. So, make sure you choose a vehicle that won’t be a financial burden on you. Remember that you can always get your dream car later, right now, make sure you find a practical car that will last you until you can afford to purchase a different car. Happy car shopping!

https://www.wesbank.co.za/home/graduate-finance Website: WesBank