Got A Car Loan And Student Loans? 5 Ways To Improve Your Finances

Up to your eyeballs with a car loan and student loans? You may feel like you owe everybody. You may not have much room in your budget. Maybe a credit card or two. Debt really puts a crimp on your life. Here you'll find 5 ways to improve your finances and ease the problem.

1. Still a Student? Consolidate

If you are still a student, think about combining your car loan and student loan into one. You may want to consider possible future student loans in this role. They offer typically low rates, but sometimes other loans have better terms. You may have some hardship benefits – deferral, lower payments when you don’t have as much, for example. Those benefits really helped me when I was between jobs or had other hard times.

A car loan, on the other hand typically doesn’t offer this kind of flexibility, and if you are paying on a car a few years old, it may not have the value to support consolidation.

I wouldn’t recommend a credit card as a way to consolidate. Credit cards, even the best, have steep fees when you are late, typically higher interest, and too often offer you the chance to add to your debt – a bad idea when things are tight already.

2. Not a Student? Use a Different Consolidation Loan

You can consolidate a car loan and student loans other ways as well. First, you could get a regular student consolidation loan to combine your student loans. This helped me reduce my payment significantly. You won’t be able to include the car, but it still may help. See the next items for help on the car.

A quick note on a straight consolidation loan from a bank or credit union. You can just apply for a consolidation loan, lump your loans together and make one payment. The problem is you may not be able to get a better payment. If you apply for one of these, look at the payment before you sign and compare it to the payment you are making on the loans separately. Add up your payments to see if it will help.

You should also consider the interest rate. You will probably not have a great rate, since consolidation loans don’t usually have any collateral. If it doesn’t help your budget and charges you more interest, it probably isn’t a good idea.

3. Improve Your Budget By Improving Your Car Loan

Notice I didn’t say improve your car. Here are a couple of ways to make your budget work better by changing your car loan.

- First, think about selling your car. If you can sell your car and eliminate an expensive loan, that might really help. If you bought too much car, this may save you. Be sure you know how you will get around if you get rid of the car. Some cities are setup so you don’t really need one except for weekend trips, and you can rent for that (if you are 25 or over).

- Second, and I have done this, think about refinancing your car. I had a normal car loan and student loan, then found out a new bank would give me a great rate on refinancing my car. I took it, lowered my interest and have used that bank ever since. Didn't help the student loan, but the car loan was less expensive.

For my UK visitors, You can compare loans at this car loans page.

4. Have You Tried Loan Forgiveness?

Loan forgiveness works like a backwards grant. You apply to a group that offers a loan forgiveness program, or loan repayment program. If you get accepted, they send your student loan lender a check. Voila, less loan to repay.

Many professions have some kind of loan forgiveness option. You can find more information on programs on my loan forgiveness pages.

5. Instead of Debt, Don’t

I have to put it in. If you haven’t gotten the car loan and student loans, or the credit cards, don’t. Find a way to live without them. Why? Once you have them, you have a vacuum attached to your bank account sucking the cash out every month until you pay it off. Stay away, use cash, and be happier.

I just read a great book on this subject by Richard Paul Evans, called The Five Lessons A Millionaire Taught Me. Excellent book, you can read it in an evening or two. Check it out at the library and follow his advice. And yes, he is the same guy who wrote the Christmas Box.

6. Another Great Idea: Get a Bigger Bank Account

All right, I know I said 5, but I've got one more you might like. I’ll give you a short version of one of Mr. Evans’ lessons right here: increase your income. Find a second job, or start a small business you can run at home. A friend of mine teaches sewing lessons. Another teaches childbirth classes to couples.

What could you do from home to add a few dollars to your income? To add a hundred? A thousand?

Debt Makes Poor Company

Debt can haunt you for years. Make some changes and get rid of it. Cancel your satellite service and apply the money to pay off a debt. Drive your old paid off car for a few more years and use the money to pay off that old student loan. Stop using your credit card so you don’t add to your debts.

Tough steps, I know. I’m working on some of them myself. They pay big dividends, though. Knowing you have one less vacuum pulling money out of your budget – one less debt to pay – really feels great. You want to pay off a car loan and student loans? No sweat, just make the changes and get started. You can handle it.

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