What Makes More Sense???

[Dermologue]

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OK, I'm not wondering about the ethics of this question, strictly the financial implications...Say you are a graduating med school senior in a few months, transport was calculated a part of your cost of attendance in determining how much loans you get.

Say you have an extra 11 grand left over and you want to buy a car for 11 grand. Does it make more sense to pay back the left over loans and get a private car loan to purchase your vehicle
(I think car loans are at like 3% interest right now)... but then you have monthly payments to make as a resident on the private car loan and loan fees etc.... I believe all my remaining extra loan money of 11 grand is grad plus (at like 8.5% interest), on the other hand.

Any input here on what makes sense?

 

[alwaysaangel]

OK, I'm not wondering about the ethics of this question, strictly the financial implications...Say you are a graduating med school senior in a few months, transport was calculated a part of your cost of attendance in determining how much loans you get.

Say you have an extra 11 grand left over and you want to buy a car for 11 grand. Does it make more sense to pay back the left over loans and get a private car loan to purchase your vehicle
(I think car loans are at like 3% interest right now)... but then you have monthly payments to make as a resident on the private car loan and loan fees etc.... I believe all my remaining extra loan money of 11 grand is grad plus (at like 8.5% interest), on the other hand.

Any input here on what makes sense?

If I were you I would just buy the car outright with your 11k. You are already guaranteed the money you have (while the super low car interest rates require an absurdly high credit score that most students don't have).

Add in the fact, that part of how car dealers make money is by upping the car price for the "great interest rate" you get - and you get no benefit by taking a car loan for the car.

 

[Dermologue]

If I were you I would just buy the car outright with your 11k. You are already guaranteed the money you have (while the super low car interest rates require an absurdly high credit score that most students don't have).

Add in the fact, that part of how car dealers make money is by upping the car price for the "great interest rate" you get - and you get no benefit by taking a car loan for the car.

You raise an interesting point...Before med school, my credit score was something like a 740 (had paid off a car loan etc)...now i wonder what it is with all this debt...arent we entitled to a free credit report annually or smthg? i don't know if we get the score and all but i'd like to know

 

[alwaysaangel]

You raise an interesting point...Before med school, my credit score was something like a 740 (had paid off a car loan etc)...now i wonder what it is with all this debt...arent we entitled to a free credit report annually or smthg? i don't know if we get the score and all but i'd like to know

You get one free credit report from each of the three major companies each year (so 3/year whenever you want) but it won't give you your credit score.

Even then, I had a 748 when I applied for a loan and it wasn't considered "excellent" so I couldn't get the best rate. I really wouldn't count on the 2.9% or 0.9% loans.

Plus some car loans are SUPER sketchy. My brother is an idiot and got caught into one that the way it was set up you paid the interest first then the principle. So when he got into an accident 3 years into a 5 year loan he had no equity in the car and got nothing back.

Just use the money you have. Being able to pay cash will get you a better price.

 

[TooMuchResearch]

You get one free credit report from each of the three major companies each year (so 3/year whenever you want) but it won't give you your credit score.

Even then, I had a 748 when I applied for a loan and it wasn't considered "excellent" so I couldn't get the best rate. I really wouldn't count on the 2.9% or 0.9% loans.

Plus some car loans are SUPER sketchy. My brother is an idiot and got caught into one that the way it was set up you paid the interest first then the principle. So when he got into an accident 3 years into a 5 year loan he had no equity in the car and got nothing back.

Just use the money you have. Being able to pay cash will get you a better price.

Was this with the car dealer? With a 748, you should have qualified for the best available rate. It is my understanding that often the manufacturer allows the dealer to keep the percentage they collect above the manufacturer's cut, so it's very possible the dealer was screwing you. Make sure to shop around and prequalify before you actually go to the dealer.

And never get a loan with a prepayment penalty. That way, if the interest rate on whatever you have your other cash in tanks, you can always just pay off the loan.

 

[alwaysaangel]

Was this with the car dealer? With a 748, you should have qualified for the best available rate. It is my understanding that often the manufacturer allows the dealer to keep the percentage they collect above the manufacturer's cut, so it's very possible the dealer was screwing you. Make sure to shop around and prequalify before you actually go to the dealer.

And never get a loan with a prepayment penalty. That way, if the interest rate on whatever you have your other cash in tanks, you can always just pay off the loan.

No it was a residency/relocation loan. But still I didn't qualify as "excellent" credit so I presume a car dealer would pull the same crap.

And my family just doesn't take loans from car dealers. So thats what I was taught. My brother was just dumb and went off half-cocked when he was 19. In my opinion, mixing up buying and financing at one company just seems sketchy regardless of the details.

 

[ucbsmd]

You get one free credit report from each of the three major companies each year (so 3/year whenever you want) but it won't give you your credit score.

If you have an AMEX card you can get your score from Experian once a year at no charge.

 

[The White Coat Investor]

I'd buy a $4000 car and send the $7K to the lender.