MONEY SMART KIDS


In-School Loan Consolidation

Janet Bodnar

Rates on student loans are rising, so consolidate now -- even if you're still a student. Plus: Find out the best way to finance a car when you're young.



I'm still in college and have about two years to go. Should I refinance the student loans I already have even though I will be getting other loans to finish school?

Yes, by all means consolidate your loans right away.

Interest rates on outstanding Stafford loans will rise substantially on July 1. Start the consolidation process before then so that you can lock in the current rate -- 4.7% for students who are still in school or for new grads who are in the six-month post-graduation grace period, and 5.3% for borrowers already in repayment.

If all your loans are held by a single lender, contact that lender to get information about consolidating. If your loans are held by a number of lenders, go to ConsolidationComparison.com or FinAid.com for information and help in choosing a lender.

Financing a car

I'm 21 and will soon be graduating from nursing school. I want to buy a car, but I don't have any credit. Will I be able to finance a car or should I keep saving my money to pay for one in full?

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Even if you had a credit record, it could be tough for you to finance a car. Whether justified or not, dealers often assume that young, first-time car buyers are a flighty bunch. "They change jobs, move around, and have no history for lenders to gauge how they'll repay," says one dealer.

Even using a credit card responsibly for a few years may not be enough. If you've never had a car loan, a dealer might still turn you down.

Check into special programs offered by automakers to help recent or soon-to-be graduates purchase a new or used car. Or check with your own bank or credit union (or your parents') to see if you can arrange financing before you hit the dealerships. Then you can compare rates.

As a last resort, you could ask a parent to co-sign a loan with you. That's something the two of you should negotiate, but it's not my favorite option. I don't like the idea of parents and kids mixing credit histories, and your parents would be on the hook if you were late making payments or defaulted on the loan.

If you have trouble borrowing, seek a less expensive car and keep saving until you have a down payment of at least 20% and preferably more. You may find it easier to get a loan.




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