Can I use a school loan to buy a car?

I just got through my freshman year at college. Now that I’m a sophomore, I’m allowed to have a car. The only problem is that I don’t have one. However, I have my student loan money for next semester and I’m tempted to use it to buy a car. Should I use a school loan to buy a vehicle?

Answer
Congrats on finishing your freshman year! Now that you’re a sophomore, the allure of having a car on campus is certainly strong. However, it’s technically a misappropriation of funds. If you got caught (although unlikely), you’d be in a world of trouble.
Because the funds are already in your account, the government or even private lenders don’t necessarily look where you’re spending the money. So you could buy a car, but think about this first:
  • Student loan rates are higher than car loan rates.
  • Student loans are meant to be paid back over a long period. You wouldn’t get a 10-year car loan, so you wouldn’t want to do the same with your school loan.
  • You may not have enough money left for boarding, food, and tuition.
Based on the reasons above, using a student loan to pay for a car doesn’t make sense. Instead, you should think of a few other options:
  • Borrowing a car from your parents or a family member
  • Saving up cash to buy a used car
  • Getting a car loan that has a low monthly payment
  • Using a carsharing service such as Turo when you need a ride
If you decide to purchase a used car or get a car loan, remember that you will also need to budget for car insurance. To get the best rates and save the most money, use the Jerry app.
As a licensed broker, Jerry can help you find and compare quotes from over 50 top providers in minutes. When you find a great rate for your new or new-to-you vehicle, Jerry can help you buy your new coverage with as little hassle as possible.
Eric Schad
Answered on Nov 25, 2021
Eric Schad has been a freelance writer for nearly a decade, as well as an SEO specialist and editor for the past five years. Before getting behind the keyboard, he worked in the finance and music industries (the perfect combo). With a wide array of professional and personal experiences, he’s developed a knack for tone and branding across many different verticals. Away from the computer, Schad is a blues guitar shredder, crazed sports fan, and always down for a spontaneous trip anywhere around the globe.
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