Taking out a private student loan for buying a car?

College Life
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<p>Okay, so I've got this crazy idea. I need (okay, mainly want, but having one would make life easier) a car. Nothing fancy, just like a Focus or similar. I don't have a job, so I can't get a normal auto loan. And even if I could, I wouldn't be able to pay it.</p>

<p>However, I imagine I WILL get a job at some point between now and the end of college. And I know I'll have a job by the time I get out. Since I don't have to pay back a student loan till after I graduate, I have time to find a job. Plus, AFAIK the interest rates aren't horrible.</p>

<p>Thoughts? Am I missing something here?</p>

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<p>Technically, you could - but I’ve heard since the decline, it’s near impossible to get a private student loan (or whatever it’s called when the money is sent directly to the student.)</p>

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<p>Did you try going to a dealership and work something out?</p>

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<p>It’s a variable interest rate loan, and you need a cosigner if you don’t have enough credit (or probably a job.) They also don’t just hand you the cash, it is certified through your school and disbursed directly to your school.</p>

<p>It may not even be legal to use the funds for a non-school expense.</p>

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<p>Twisted, the private loans from Wells Fargo go straight to students.</p>

<p>@Jim no I haven’t. They’d probably laugh me out of the store if I told them I wanted to defer payment till I graduated.</p>

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<p>Are you talking about a new car? Or used? How big of a loan would it be? I don’t have advice; I’m just curious :).</p>

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<p>I’d love a new car but I know they depreciate fast… so I guess used. Probably a newer model Ford Focus. So like $13K.</p>

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<p>[The</a> Perils of Private Student Loans | The College Solution Blog by Lynn O’Shaughnessy](<a href=“http://thecollegesolutionblog.com/2009/04/22/the-perils-of-private-student-loans/]The”>http://thecollegesolutionblog.com/2009/04/22/the-perils-of-private-student-loans/)</p>

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<p>Christ</p>

<p>I should just enlist in the USAF Reserve and get a bunch of bonus money.</p>

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<p>or do ROTC and get monthly stipends while your a Junior and Senior. Then get paid 2nd LT wages when in active duty. If you get deployed you can make mucho money while your out there because you get a bonus for deployment, 2nd LT’s make a lot compared to a regular PFC, and you don’t use much money. One of my friends saved enough money after two deployments to buy an Escalade and put down a huge down payment on a house. This was including the money he saved from his signing bonus.</p>

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<p>do it the old fashioned way, maybe? Like get a job and save up the money?</p>

<p>Do you really need instant gratification?</p>

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<p>Jim I’m doing ROTC. I’m not a citizen yet so I can’t get a scholarship (which also provides those stipends if I’m not mistaken), and obviously I’ve got a couple years till I can contract. But yeah they do make some decent money, especially when you factor in the benefits like BHA.</p>

<p>edit: Boysx3 that’s the ideal way, but considering the only jobs I could get will probably pay minimum wage, it would take me two years just to save up for a decent car. And that’s assuming I don’t spend any of the money or pay any taxes.</p>

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<p>Why do you even need the car?</p>

<p>I am guessing you don’t need it for a job because you don’t have one.
I mean, I really cannot think of an important reason to go 13k in debt for something other than tuition or housing.</p>

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<p>I’m not an expert in auto-buying or personal finances, so I would venture to talk to someone who is.</p>

<p>But anyway, I would not shoot down this idea outright at first glance.</p>

<p>Obviously the most cost-effective way to buy a car would be to pay for it all at once (least interest as possible) or put down as much money up front as possible.</p>

<p>But of course, that is not possible for many many people.</p>

<p>Taking out a student-loan for the purposes of financing your car does not sound like a crazy idea in itself. Surely, the interest you would be paying on your outstanding car bill will be much higher from the car dealer than the payor of your student loan (which is typically pretty low, or has no interest until graduation). A major difference, in fact. So from an economic stand-point, it makes perfect sense and is actually encourageable.</p>

<p>Obviously the student loan is automatically applied to tuition. And by the way, I’m talking about the typical through-your-school student loan, not some private company that will gauge you and bury you in legal terms designed to part you from your money as quickly as possible.
So depending on whether your parents or you pay your tuition, you’re going to have to rearrange money in some ways.</p>

<p>Like if your parents pay tuition, tell them you are taking out an addition student loan that you want to apply towards the car; i.e. you take out an additional student loan, and your parents pay the difference in tution payments to you, which you in turn put towards the car. In essence you are doing nothing unethetical or illegal. You are taking a student loan out for your car, but not really. Don’t know if that makes sense or not lol. Taking out a loan for one expense gives you more money for another, right?</p>

<p>The only question is if the car is worth the expense to have now or waiting until you graduate. I don’t know, I’m sure there are more factors I haven’t considered.</p>

<p>I guess the question is — depending on the size of the loan — is it wise to go into so much debt for any car, regardless of how low interest that loan is? I don’t know.</p>

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<p>You don’t need 13k for a good car. 5k will buy you a more than decent car that will run.</p>

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<p>“the interest you would be paying on your outstanding car bill will be much higher from the car dealer than the payor of your student loan (which is typically pretty low, or has no interest until graduation)”</p>

<p>Not necessarily true, and definitely wrong. Private student loans have variable interest rates and they can shoot up at any time, and there is DEFINITELY interest while you’re in school. A private student loan is not a subsidized stafford loan. It is essentially paying for school with a credit card.</p>

<p>“And by the way, I’m talking about the typical through-your-school student loan, not some private company that will gauge you and bury you in legal terms designed to part you from your money as quickly as possible.”</p>

<p>You two are not talking about the same things, then.</p>

<p>Furthermore, he has two options:</p>

<ol>
<li><p>Go through the school, as you said. Will not work. The school will not certify a loan that is more than the COA. He cannot take out loans in excess. There is not a way around this.</p></li>
<li><p>Get funds directly disbursed to him. I am pretty sure it would be breach of contract to spend it on non school related funds, but he’d have to check. I am just remembering my own contract. If that is true, though, and they found out he went against the terms of the loan, they could require that he pay it back immediately. OOPS.</p></li>
</ol>

<p>If his parents give him money to put towards the car instead of paying tuition, which I know my parents would not be willing to do, his parents are paying for the car and he is just taking out a student loan for tuition instead of paying out of pocket. That is possible if his parents are willing to do it. Mine would be ****ed if I even asked. When parents are paying tuition it is not with the idea that they are giving you x amount of money to do with it what you will, they are paying for your school. Paying for your school is their priority, not you and whatever you want at the moment. If my parents were paying for school, they would think it extremely presumptuous if I asked them to stop paying for school to buy a car instead, they’d probably not pay for either anymore.</p>

<p>I think your first car being a 13k car is a case of expecting a higher lifestyle than you have yet earned.</p>

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<p>“I think your first car being a 13k car is a case of expecting a higher lifestyle than you have yet earned.”</p>

<p>I guess so… blah.</p>

<p>Part of the reason I want a car is so I’m not forced to either live on campus or live in the ****ty apartments near campus. The dorms at my school suck, and I hear the apartments aren’t great either.</p>

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<p>TwistedxKiss — if you had read carefully what I said, you would have realized that I already pre-empted your obvious objections, and have already answered them.</p>

<ol>
<li><p>You DO get a subsidized stafford loan, or what have you through your school, depending on what is availabe to you — and loans through your school are always available- if not the best ones, at least something. Why is this? Because it is is PROFITABLE for the lender.</p></li>
<li><p>Unless OP is on full scholarship (doubtful) there will be a bill of at least 8k he is paying per year. He can get loans for this.</p></li>
<li><p>Let’s say he takes out a loan for $6,000 for tution for the school year. WHICH IS PAID TO TUITION DIRECTLY. Guess what? That is $6,000 LESS he has to pay out of pocket for that year. He then goes to his piggy bank that says “that 6k you were going to pay for tuition this year but no longer have to because the bank/loan is paying it.” He takes that money, and uses it to pay for the car UP FRONT, MONEY DOWN.</p></li>
</ol>

<p>Get it now? Accounting 101.</p>

<p>It makes the most financial sense, assuming you have already decided to buy the car.</p>

<p>I think most parents would agree to it (if they agreed to the car). But, as long as we are on the topic, you don’t even have to tell them at all. You simply get the loans yourself (no parental permission or notification is given). And then when your parents overpay tuition, you get an over/credit/ refund on your account which the finance/ cashier office at your school will pay in the form of a check to you, the student. Well, the specifis will vary school to school but it can be pulled off.</p>

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<p>“1. You DO get a subsidized stafford loan, or what have you through your school, depending on what is availabe to you — and loans through your school are always available- if not the best ones, at least something. Why is this? Because it is is PROFITABLE for the lender.”</p>

<p>Stafford loans are FEDERAL loans. The OP specified PRIVATE loans, which are NOT stafford loans.</p>

<p>“2. Unless OP is on full scholarship (doubtful) there will be a bill of at least 8k he is paying per year. He can get loans for this.”</p>

<p>He can, but he needs to come up with the money for school AND the money for the car at the same time. If the hypoethetical COA is 8k, he can’t take out 8k+13k to pay for school and the car. He could take out the 8k and his parents could pay the tuition so he could keep the loan money, which may or may not break the terms of the loan and get him in trouble, but that still has him coming up short and/or having to come up with the money for both. The loans cannot pay for both because you cannot exceed the COA.</p>

<p>"
3. Let’s say he takes out a loan for $6,000 for tution for the school year. WHICH IS PAID TO TUITION DIRECTLY. Guess what? That is $6,000 LESS he has to pay out of pocket for that year. He then goes to his piggy bank that says “that 6k you were going to pay for tuition this year but no longer have to because the bank/loan is paying it.” He takes that money, and uses it to pay for the car UP FRONT, MONEY DOWN."</p>

<p>Assuming he has the money for tuition in his pocket, which he hasn’t said. </p>

<p>"Get it now? Accounting 101.</p>

<p>It makes the most financial sense, assuming you have already decided to buy the car."</p>

<p>Assuming your parents are willing to pay for the car instead of tuition when you take out the loans for tuition instead, unless you are going to lie to the bank and risk being forced to pay back the loan immediately.</p>

<p>“I think most parents would agree to it (if they agreed to the car). But, as long as we are on the topic, you don’t even have to tell them at all. You simply get the loans yourself (no parental permission or notification is given). And then when your parents overpay tuition, you get an over/credit/ refund on your account which the finance/ cashier office at your school will pay in the form of a check to you, the student. Parents none the wiser, ever.”</p>

<p>You don’t think his parents are going to wonder where the 13k car came from? I don’t know about your parents, but mine weren’t born yesterday.</p>

<p>And this would also require that OP has enough credit to take out the private loan by himself, which while possible is not particularly common for an undergrad.</p>

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<p>Definitely don’t have enough credit. And I’d still need to pay for god damn insurance.</p>