Okay!! Let's go to a driving school! Let's get a driver's license! But the cost of the lessons is so high that you might not be able to cover it with your savings, or it might be tough to manage your finances in the future. Have you ever wondered whether to take out an installment loan to pay the fees?
This article covers everything related to driver's license loans, so if you read it, you will find out things that are difficult to ask the staff at the driving school about loan screening, and things you should check when applying. We have also prepared an actual loan simulator, so you can get a better idea of how much interest you will incur depending on the number of payments. Once you have finished reading this, you will no longer be worried about paying your loan at the driving school. On the contrary, it would be great if taking out a loan would allow you to enjoy a happier car life.

1. We strongly recommend a loan from a credit company affiliated with the driving school.

Three payment methods available at the driving school

Driving School generally offer cash payments in a lump sum, cash installments, and loan payments.

lump sum cash payment

Lump-sum cash payment allows you to pay the total cost in cash at the time of enrollment, including short-term and priority reservation options and peace-of-mind options that eliminate additional costs. In this case, please bring cash to the school reception and pay.

cash installments

With cash installments, you generally pay the entrance fee and course fees in cash at the time of enrollment, and pay the skills fee and examination fee each time you make a reservation. In this case, the total payment is the same as a lump sum cash payment.

loan payment

What is a loan from a credit company affiliated with a driving school?

Generally, the cost of obtaining a driver's license at Driving School is expensive, ranging from 250,000 to 300,000 yen. Just like there is a mortgage when purchasing a house and a car loan when purchasing a car, there are loans that allow you to pay the license acquisition fee in installments, and all Driving School across the country are affiliated with credit companies. In addition to Driving School, agencies that introduce driving school plans and university co-ops can also apply for installment loans from affiliated credit companies.

What is the difference between cash installments and loans?

For cash installment payments, there is no examination at the driving school. On the other hand, in the case of a loan, in addition to applying to the driving school, you must apply for a loan from a credit company, and only after passing the prescribed examination can you make the payment in installments. In this case, an interest fee will be charged in addition to the training fee. Interest charges vary depending on the number of payments.

Now, let me explain it clearly.

Because of this interest burden, those who can afford it should choose a low number of loans that will minimize interest charges.

2. Three reasons why we recommend loans from credit companies affiliated with driving schools

1. The customer's payment needs are that no down payment is required. In the case of cash split, approximately 30% of the total tuition fee (admission fee and course fee) must be paid at the time of enrollment.
2. You can freely choose the payment period (number of payments). How many installments can you pay?
   (1) There is a nine-month training period to obtain a driver's license. In fact, the average number of payments made by customers who apply for a loan to a driving school is 13, and many of them request payments over a period of one year or more. This also matches the potential needs of loan users, who want to make payments over a long period of time.
   (2) In addition, you can make payments over a maximum of 60 installments (five years). Therefore, the principal alone will be approximately 300,000 yen (lesson fee) ÷ 60 installments (five years) = 5,000 yen + interest.
3. You can choose the month when payments start.
   (1) For example, if you have no income at present, but plan to start a part-time job next month, and will be able to save a little in about six months, you can start a driver's license loan this month, but start making payments six months from now. (This is known as a skip loan.)

So, how many people actually use loans?

One in five license applicants use a loan

In the overall market, 15% to 20% of people obtain their driver's license by taking out a loan. The loans offered by Driving School in partnership with credit companies are specific purpose loans that are applicable only to tuition fees, so even minors can apply with parental consent, which is why they are popular.
Below is a quick reference chart of the application criteria of major credit companies in the driving school industry.

*After October of graduation year

There are also benefits for the driving school.

In addition, there is no need for the driving school to manage accounts receivable, the risk of bad debts can be prevented, and those who use the cash split method will pay the skill fee each time the training is conducted. We recommend a loan because some students have to suspend their lessons for a long period of time because of this.

3. The difference is clear when compared to other loans

Next is a comparison table for credit companies, bank loans, and consumer finance.

Because loans from credit sales companies are more advantageous for customers than other loans, driving schools across the country have contracts with credit sales companies. On the other hand, bank loans and consumer loans cannot be applied for by minors (18 or 19 years old), and drivers license loans are considered unsuitable because they require a person with a stable income.

4. Will the screening go well? Will one in five people be turned down?

However, it is by no means the case that all of these loan applicants pass the application screening process; in fact, more than one in five loan applicants are rejected.
In the market as a whole, the approval rate for on-campus applicants is 80-90%, while the approval rate for camp applicants is 60-70%. In other words, more than one in ten people are rejected for on-campus applicants, and three in ten people are rejected for camp applicants.
Now, let me explain the reasons for rejection separately for minors and adults.

5 reasons cited as reasons for refusal by adults

1. Accidents in the past: If repayment is not made by the 61st day after the payment due date, it will be registered with the credit information agency as a long-term delinquency.
2. Payment delays: Credit information agencies display payment information for the most recent two years, and in cases where only a portion of the invoice amount is deposited on the scheduled date, or where no payment is made, this information will be shared.
3. Large balance: This is the case when the loan repayment ratio to annual income is high. (When it reaches about 35-40%, it is not good.)
   Example: Existing loan + new loan: 1.5 million (annual loan repayment) ➗ 3.5 million (annual income) = 42.8% (repayment ratio)
4. There are weak points in the attributes of the contractor: If the evaluation materials are weak at the time of screening, such as ``short years of service'', ``short years of emigration'', or ``annual income is low relative to age'', it may be difficult to pass the screening.
5. Application by someone other than the policyholder: Although the person who originally obtained the license is the person who is applying, if the applicant is a family member, there is a reason why the policyholder himself/herself cannot use the loan, so we will decline the application based on a comprehensive judgment. There's a case.

Two reasons cited as reasons for refusal of minors

1. Since this was almost the first time using credit, in the above cases, options ④ and ⑤ accounted for the majority of rejections.
   The above are the main reasons for denial, but depending on the results of the screening, there may be cases where the application will be re-screened to require a guarantor, or the procedure may be changed to a written procedure. Since the screening for driver's license loans is conducted by credit companies, the screening contents and results are not made public.

5. Actual simulation: How much will it cost per month? For how long will you have to pay?

Deepen your image with simulation

So, we actually prepared a simulation.
For your reference, we will use a certain credit company as an example to show how much interest fees are charged when paying in installments.

Credit card vs license loan: Which is better financially?

If you pay the training fee of 300,000 yen with a credit card and pay in 20 installments, the installment fee will be 40,800 yen and the total payment amount will be 340,800 yen.

Credit card installment fee Monthly interest rate: 0.68% (actual annual rate 13%~15%)

If you pay by credit card, you will receive card points, which are generally around 0.75%. Therefore, the card points will be 300,000 yen x 0.75% = 2,250 yen.
The difference between the installment fee and the card points will be 38,550 yen. In addition, your credit card limit will be suddenly reduced, which may affect your ability to use your credit card for shopping, etc. from this month.

Next, if you pay a training fee of 300,000 yen with a driver's license loan, and if you pay in 20 installments, the installment fee will be 25,530 yen, and the total payment will be 325,530 yen.

Driving license loan installment fee effective annual rate 9.5%

In the case of a driver's license loan, compared to a credit card, the monthly burden can be reduced by 15,000 yen in total, or just under 800 yen per month.

Conclusion: Pay in installments with a credit card with card points in mind. Considering the actual burden, a driver's license loan is definitely more economical.

【lastly】
Obtaining a driver's license is like getting a ticket to become a licensed member of society. Here, we have explained about driving school loans, but the loan recipient is obligated to repay the debt, and the driver is qualified to drive by taking responsibility for protecting the safety of others in the traffic society. As a new member of society and a novice driver, we sincerely hope that your driver's life will be a long and fulfilling one.