There is one thing that nearly every med student knows will happen after they graduate: they will have a heavy student debt load. Given that challenge, it can be difficult for a new graduate to find the auto loan they need. Many lenders understand that challenge; offering auto loans for physicians and doctors, while ignoring their high debt-to-income ratio.
Lending Challenges Faced by Physicians, Med Students
Physicians and doctors who are just entering residency or setting up their private practice face the same challenges as most borrowers: lenders are going to compare their income to their debt load. This is called your debt-to-income ratio or DTI. It is a major factor used when determining your ability to repay an auto loan. As a general rule of thumb, large national lenders do not like to approve a loan if the borrower has a DTI that is in excess of 36 percent. Regional and local banks as well as credit unions have more flexible guidelines, but they cap their DTI requirements around 40 percent. One saving grace is your credit score. If it is over 720, then you can be approved for an auto loan with a higher DTI.
The second challenge is your credit score. Many medical students have little or no credit history beyond the student loans they have accumulated. Under normal circumstances, that would make obtaining an auto loan nearly impossible when combined with a high DTI, but an emerging med student has an ace up their sleeve: the high income that is on their horizon. Lenders want to establish long-term relationships with high income earners, so they will offer riskier loans at the beginning of a doctor’s career. The end game is to entice you to bring all of your financial needs to them: banking, equipment loans, mortgages, construction, etc.
Doctors: Where to Look for Auto Loans
No matter your income level, you should always shop your loan around. Shopping your loan allows you to find the lowest interest rates and best terms. With that in mind, you should put together a list of three to five institutions. A great place to start is any local credit union that specializes in biomedical workers. In Maryland, Virginia, Washington D.C. and West Virginia that lender is National Institutes of Health Federal Credit Union. Most states have such specialized lenders to meet the unique challenges of the biomedical field.
If you do not have one of these lenders in your area, look to any lender that you have an established relationship with first. They know you and are going to be more flexible than a stranger. Always include local credit unions on your list. They offer lower interest rates and better returns on your savings and other investments. They also have looser lending guidelines, so are willing to approve a wider spectrum of credit profiles. As another option, most automakers have recent graduate loan programs. These programs apply to new cars only, but take all of the income/debt challenges a new graduate faces into consideration. Premium automakers usually do not have these programs; so, if you want to jump right into a BMW or Mercedes-Benz, you may be out of luck.
Physicians and Med Students with Credit Problems
If you have tried several of these options and find yourself being denied the auto loan you need or you know you need a bad credit auto loan, you still have multiple options. There is a plethora of bad credit lenders who are willing to offer auto loans for physicians and doctors with poor or no credit. Most of these specialty lenders operate online only and will be easier to find by searching specifically for bad credit auto loans. These lenders have very flexible lending guidelines in order to accommodate as many credit profiles as possible. They recoup their investments in risky loans by requiring higher interest rates and demanding shorter loan repayment terms, but that is to be expected. The good news is that these lenders report all loans to the major credit agencies, boosting your credit score for future loans.
Working with Us
We help our customers connect with dealers, lenders, and credit unions who are willing to provide you financing. When you submit your application, we work to place it with the right company in your area, and you will have the convenience of working with a local vehicle finance expert. Go here to apply online.
Even though there are plenty of options for physicians and doctors to get auto loans, you need to be careful. Read the sales agreement to make sure the dealer does not slip anything in that you do not expect, then read the loan agreement thoroughly. Make sure all numbers match up with your understanding of the deal before signing anything.