Will an auto loan affect my approval for a student loan for grad school??

Question

I want to get a new car with two years from now, but I forsee that this will also be around the time I go to grad (law) school. The payment will be 25% of my gross income and I will be going to school part time, so I keep my day job. By that time I would have worked at the same job for 3 years, and my credit score should increase as well. My schooling is more important than a nice car, so can anyone help me or advise me?? Thanks!!

Answer 1

Honestly, your car loan shouldn't have much affect on your ability to get most federal student loans. In fact, there are some types of federal student loans that don't require any credit check at all: Stafford and Perkins Loans, for example, do not. PLUS Loans (which used to be just for parents but are now available to graduate students borrowing on their own behalf) require a credit check but a very "mild" one. For the most part, with PLUS Loans, as long as you don't have *bad* credit, you'll be OK (i.e. no credit and limited credit are usually OK with PLUSes). Now, you should be able to borrow as much PLUS Loan as you need to cover tuition/fee/housing. But if, for some reason, you need to apply for a private (a.k.a "alternative") student loan, you will need to select your loan carefully (look for loans that don't focus much on debt-to-income ratios) and make sure you've been making all your car payments on time. 25% of your income is a little much for a car. If you determine that this expense if worthwhile, just make sure you're careful in managing both the auto and educational loans.

Answer 2

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Answer 3

A car loan will definitely affect your debt to income ratio. The higher your d/i ratio, the less likely you will be to get another loan.

On the flipside, making timely payments and otherwise keeping your credit record in good shape will help.

Good luck to you on your future plans.