In NL, what should I know about student borrowers for car loans?

Student borrowers in Newfoundland and Labrador face unique challenges when seeking car loans, primarily due to limited verifiable income and a nascent or non-existent credit history. Lenders in Canada, including those operating in NL, assess risk based on these factors, often requiring a co-signer with established credit and stable income to mitigate perceived risk and improve approval chances. Alternatively, a substantial down payment can significantly reduce the overall loan amount, making monthly payments more manageable and lowering the lender's exposure.

Given the current market conditions projected for 2025, interest rates remain elevated across the board. For students, who are often considered higher risk, this translates to potentially much higher interest rates, making it crucial to avoid excessively long loan terms. While longer terms offer lower monthly payments, they drastically increase the total interest paid over the life of the loan and heighten the risk of negative equity, where the car's value depreciates faster than the outstanding loan balance.

This matters because getting trapped in a high-interest, long-term loan can significantly impact a student's financial well-being, potentially hindering their ability to secure future financing for housing or other significant purchases. It is paramount for student borrowers to understand the full cost of the loan, including all fees and interest, and to ensure the monthly payments are comfortably within their budget, accounting for other living expenses and potential income fluctuations. Building a positive credit history through responsible repayment is invaluable for future financial health.