If you are heading for college, it is more than likely that you will borrow money to help pay for your education. You will exhaust all scholarship and grant options. You will look for federal student loans and maybe loans sponsored by your school or other private institutions.
Imagine you are suddenly flush with cash. More money than you ever had. You want new clothes. You want your own place to stay. And you want a cool car!
But getting your first car with borrowed money – is that a good idea?
Can You Pay Back?
Make sure you understand that all money must be repaid. It doesn’t matter if you get your degree or not, or if you get a job or not. The lender wants his money back.
The point here is that missed payments on your student loans can hurt your credit rating and cause lots of other financial problems. Once you start digging that hole, it may stay with you for a long time!
Getting your first car with the student loan is a risk. Make sure you know your limits.
How Much Should You Borrow?
A common rule is to borrow no more than your expected starting salary. Unfortunately, starting salaries have been slipping the last couple of years. Don’t overestimate your future earnings. You may be confronted with a harsh reality.
It is true that the federal repayment plan comes with a better safety net, but you should still borrow wisely.
Keeping a good credit rating is a large part of your dream to get your driver’s license and your own car. Don’t mess it up!
Some Good Sources
Credit Karma gives you access to free credit scores, free monitoring, and free advice on how to improve your credit.
FinAid can help you figure out how much school will cost. They have tools for calculating college costs, loan payments, savings, and more.
The US Department of Education has tons of information about choosing and applying to schools, and taking required tests. You will learn if you are eligible for financial aid or not. They will help you with repayment plans and how to get help with problems.