So I have a dilemma... I am about to sell my condo and I'm not sure whether I should use that money to buy this car I want or use it to pay part of my student loan off. I just graduated in May 2010 in Pharmacy and am doing a residency right now. I recently did try to get a car loan and got denied because of my debt to income ratio probably factoring my student loans in (~70k) and credit card debt. DTI calculated is about 0.5. That was about last month and I have been able to bring it down to 0.36. Anyway with the sale of the condo I estimate getting about 50k back and I have three options.
1. Pay cash on the car and just make monthly payments on my student loans which I'd pay more than the minimum and pay it off within 2-2.5 years.
2. Pay down the loan to about 20k and try to apply for a full car loan again. I think I'd get denied for no down payment though.
3. Pay part of my loan and make a 20% down payment on the car and apply for the loan. I'd pay my student loan first and have that reflect on my CR before applying for the auto loan.
Right now I think options 1 and 3 are more feasible. Here are other snapshots of my CR. I have a score of 729. Average history of 4 years with the oldest being 7 years. 7 credit cards with 3 reporting balances. 2 are under 10% utilization and another has a high balance of 75% utilization. I had alot of things I had to pay for before my residency started so I am now able to pay it back. Total cc utilization is about 32%. I can probably get it down to 25% by the end of this month. So with that said any suggestions?
Starting Score (9/20/2010): 714
I forgot to mention that this is actually not an essential car to buy. I already have an old 17 year old beater car and then a reliable 99 4runner I drive when I need to. This is going to be either for an M3 or RS4. Only reason why it would cost so much. As for the house purchase that's in my 5 year plan. Because I don't really want to settle where I am right now (Temple, TX). I am looking either at Austin or moving back to Houston. In any case I know what you mean as for looking at a lower cost car... Thanks for the suggestion so far though.
Yeah I wouldn't get the car without paying my CCs off first of course. I don't owe that much more in CCs. I just needed to pick up speed on my weekend and daily work to crank in the big paychecks. When I first applied for the loans last month I didn't know that I should have some sort of down payment in hand. Would it look bad if I did like a 50% down payment and then kept the rest in the bank for a rainy day? The 0.9% for BMW is for a new car which I think a new M3 is out of my price range. I was looking at used cars and more likely to try Penfed for their rates. I have an account I opened last month with them but they were also the people who turned me down due to my DTI and how big my request was.
So it's better not to pay down the SLs first even if I don't buy a car anytime soon?
The other detail I forgot to disclose is that all of my student loans have a 6.8% interest rate. I think its compounded quarterly. I'm not 100% sure. In any case you guys have made some good insight into this. I'll definately rethink my planning at the moment. I look forward to any other suggestions I can get since I am still new to obtaining other forms of credit aside from credit cards and student loans.
Thanks for the tip I'll look into that. It'd be awesome to get them lower than what they are now. Then I can take my time paying whatever is left back.
The other thing I was thinking about is. Doesn't student loans even if they are considered good debt...count towards your DTI especially since mine are going into repayment in a few months. I am also wondering if they aren't considering my employment history of 3 months a down fall to my risk for a loan as well. Since I am a recent grad and all.