As a new graduate, you’re a desirable customer for most lenders. You’re likely to be more responsible and typically of a younger demographic—and the earlier you become a customer of a car dealership or a credit union, the more you’ll use their services over time.

Here are some advantages of applying for a car loan as a new grad:

Discounts: To help get recent graduates set up with a car while they’re still dealing with student debt, lenders may offer discounted loan rates or

first-time car buyer programs

for drivers with recently-completed degrees.

A car loan can be a great way to build or rebuild your credit: If you’ve already proved yourself to be reliable with paying off your student debt, it may reflect favorably on you when you’re applying and qualifying for a car loan.

Key Takeaway If you’re financing a car right out of college, there may be discounts and programs you can apply for to save money on your loan.

Challenges to getting a car loan as a new college graduate

On the flip side, looking for a car loan fresh out of college comes with drawbacks for lenders as well. A few factors can make it difficult to successfully apply for a car loan as a new graduate:

Unpaid student debt may prevent you from getting a loan from certain lenders.

If you don’t have a steady work situation or if you’re still looking for a position in your field, it can affect your eligibility.

Low savings can also get in the way of fulfilling a hefty down payment.

Some lenders are willing to look past these factors if you have an excellent GPA or other recognition from your college. And a full- or part-time job doesn’t hurt, either—if you’re able to work for a bit before you apply for a loan, it can greatly improve your standing with potential lenders.

MORE: How to get a cosigner for a bad credit car loan

How to get a new college graduate car loan

By taking the following steps, you can go into your loan negotiations prepared and with confidence.

1. Take stock of your credit and personal finances

Check your credit score

: Most lenders will look favorably on your loan if you have a FICO credit rating of 661 or above. If it’s lower than that, you might have to take on additional restrictions or bring on a co-signer before a lender will accept your application for a loan.

Calculate your payments: Before you head off to the dealership, sit down with your finances and consider how much you can afford for car loan payments. Your monthly expenses, including car payments, shouldn’t exceed 20% of your monthly income—make sure that you factor in gas,

car insurance

, and your living expenses, including your student loan payments.

2. Consider a loan from a credit union

Although a bank is a more traditional route for getting your car loan, it’s worth checking out what kinds of rates, discounts, and auto loan programs might be available at a credit union. They may have better deals for new graduates, as well as lower interest rates in general.

Credit unions will also generally cover older models and more used cars than a bank will. Even though you may have to pay higher interest rates, the overall loan will be less for used vehicles.

MORE:

Can you buy a car with a credit card?

3. Get preapproved before you shop for cars

Getting preapproved for a loan

is always a good step: Preapproval gives you more negotiating power when you’re deciding the terms of your loan with the lender. It will also save you time when you’re ready to sign off on your loan.

Most lenders will have preapproval forms available online to make it even more convenient.

MORE:

Personal loans vs. car loans: what’s the difference?

4. Consider a co-signer

If you don’t have a great credit history or a steady job, you may have to

bring on a co-signer

to satisfy your loan agreement. The co-signer agrees to take over monthly payments on the loan if you can’t pay them.

Having a co-signer on your loan application isn’t a bad thing—it puts the lender’s mind at ease and gives you more accountability for your loan agreement.

5. Be prepared to wait for the best car loan deal

When you’re looking for a loan, don’t be afraid to shop around!

Check out at least three lenders and what they offer before you settle on a loan. And if there isn’t a loan with good conditions available, you can always wait a while, build up your credit and finances, and try again. Or, if you find a loan that works for you but doesn’t have the lowest rates, you may have the option to refinance your loan down the road!

Another way to get the best deal on a car loan is to ask about discounts, as not all lenders will advertise which ones they have available. As a new graduate, you can find programs at some dealerships, banks, and credit unions for responsible new drivers just coming out of college.

Even car manufacturers offer discounts and rebates on new and certified pre-owned vehicles—you may be limited to certain models, but you could save a lot on your loan.

Financing 101: What new grads need to know about car loans

An auto loan is a sum that you borrow from a lender and pay back over time in installments—plus interest. Depending on the lender, you’ll have different loan terms, loan amounts,

interest rates

, and more to consider.

A car loan is a secured type of loan

—it uses your car as collateral to protect the lender’s investment.

If you don’t keep up with your loan payments, the lender is within their legal rights to

repossess the car

. If you keep up with your payments and completely pay off the loan, you’ll be the full owner of the car by the end of the loan term.

As a new graduate, it may be difficult to find a car loan, especially if you have little or no credit, or you don’t have a steady work situation. But some lenders do try to make it easier for new graduates.

MORE:

How do car loans work?

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