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May 30, 2009 9:28 PM   Subscribe

Loan to pay back loan until I get another loan? Bad idea?

First, I know no one here is my financial advisor :)

I'm a college student with rent+car payments every month. During the school year I usually have extra cash from student loans that pay for those expenses. However now that it's summer I need probably 2 grand to cover them. The obviously solution is to get a job of course, however I do iPhone and other software development that pays well but only after a few months of working without pay.

So my question is what's the best way to get 2 grand with about a months notice? Right now I plan on going to my bank (the one I have my car loan through) and asking for a signature loan or seeing if they have student loans I could get now. Any other suggestions? Feel free to tell me this is a dumb idea ;)
posted by bmalicoat to Work & Money (14 answers total)
 
It is a dumb idea to finance your life with credit.
posted by dfriedman at 9:37 PM on May 30, 2009 [1 favorite]


When you want to get out of a hole, the first rule is to stop digging.

In other words: when given the choice between earning more income and taking on more debt, INCOME is pretty much always the only good answer.
posted by scody at 9:48 PM on May 30, 2009 [1 favorite]


Response by poster: To be clear I am working currently but on a project that will not pay off for about 2 months, hence I need something short-term to fill the gap. I'm not concerned with my debt as it is pretty small and all in low-interest student loans.
posted by bmalicoat at 9:50 PM on May 30, 2009


1. Get another job.
2. Spend less than you earn.
3. PROFIT
posted by aquafortis at 9:51 PM on May 30, 2009


The obviously solution is to get a job of course. Two grand in a month works out to a job that will net $12.50 an hour, 40 hours a week. If you're working over the summer, the hourly pay will vary depending on your payment schedule, so you could probably swing a lower paying job.

Getting a loan for the situation described seems like a bad idea. Student loans, at least the kind I've dealt with, would only cover your rent if you're staying in a dorm. They wouldn't cover your car at all. What kind of collateral could you produce for a loan?
posted by boo_radley at 10:06 PM on May 30, 2009


If you are going to have a payoff in two months, talk to the bank that has financed your car loan and see if you can get a payment extension - the banks are typically pretty reasonable when you explain your situation. Just don't get another loan.
posted by zerokey at 10:08 PM on May 30, 2009


This is a dumb idea.
posted by decathecting at 10:09 PM on May 30, 2009


Based on your follow-up, it sounds like you've already made up your mind to go into further debt, despite the "feel free to tell me this is a dumb idea" coda at the end of your question. So go ahead; take on the extra debt. It is indeed a dumb idea, as you suspect; I know this because I spent several years in my 20s pursuing the same dumb idea. Then I spent the rest of my 20s and a good chunk of of my 30s paying for it. You can, too, if you like.
posted by scody at 10:09 PM on May 30, 2009 [1 favorite]


Response by poster: Thank you all for your answers, seems it is quite the dumb idea. I'll look into the payment extension and checking out a summer job and do my project in the off time I guess.
posted by bmalicoat at 10:14 PM on May 30, 2009


You could also consider reducing your expenses. Can you take on a roommate? Is there anything like a cell phone bill you could cut in half with a better plan or pay-as-you-go? What about selling the financed car (bad time, I know) and replacing it with a paid-for clunker that will get you through the next couple of years?

It would probably be best to make sure you put away some of your extra $ during the year to cover this fallow period.

Finally, I don't want to discourage you, but just make sure that you're being honest with yourself about money. A payment extension is a loan, too.

The only time it makes any sense to get a loan to pay a loan is when you roll some high-interest debt into a lower-interest debt. This is what refinancing is, and it's also what people did when they charged their credit card balances against their home equity loan. This seemed like a really good idea at the time, but some of these people are now losing their houses because they did this.
posted by dhartung at 11:01 PM on May 30, 2009


In addition to others advice on why not to get a loan and how to avoid it, how certain is that $2k payoff? If it's expected profit from developing an app that doesn't take off like you expect, or for some other reason the expected payoff fails to materialize, then you'll be stuck with even more debt.
posted by JiBB at 11:36 PM on May 30, 2009


Uh, this is what credit cards are for. Why don't you get one?
posted by delmoi at 12:29 AM on May 31, 2009


(Well, you might not want to use the cash advance feature of a credit card to pay back a loan, usually they have much higher interest rates)
posted by delmoi at 12:30 AM on May 31, 2009


What sort of development work are you doing that you don't get paid until a few months later? Probably the wrong kind of development work. As JiBB wondered, is this the sort of payment you can count on? If so, why the hell aren't you getting paid in installments, at least?

I don't know your college campus: is it at all research-oriented? When I was a student, there were tons of professors who needed some bit of development done but had no idea how to make it happen. I made some nice cash contracting for them -- if you're a good developer (and a professional one! test, document, and support!) you can easily charge upwards of $40 an hour. Of course this won't happen immediately, but for future reference you have an extremely marketable skill---there are many alternative ways of using it to make you cash.
posted by goingonit at 6:51 AM on May 31, 2009


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