Building credit is no reason to pay higher interest rate

Q. My 26-year-old daughter is buying her first car. We could loan her the money with a lower interest rate than the credit union for a three- or five-year loan, but would it be better to build her credit this way with a higher interest? Or split the funds halfway? She is highly responsible (getting her doctorate at Georgia State), but doesn’t have a credit history.

A. On the face of it, you’re concerned about her establishing credit. That will happen through the normal course of events. In my opinion, it’s foolish to be paying more to borrow the money from a credit union than from you and your spouse. I would loan her the money and let her pay the interest to you and save the difference.

Further, you’re implying that she is going to buy a brand-new car. I am not sure that’s a smart idea. Until such time as she is out of school and established in some type of employment environment, I would suggest that you buy a reasonably priced used automobile. She will pay less because she is borrowing less, and she is going to pay a whole lot less interest than she would if she borrowed through a conventional source.

Q. My youngest brother and my father own a house together. My father wants the house to pass to my brother, but is concerned that two other siblings will contest it. Other than a small bank account, which is held jointly with my youngest brother, the only other assets he has are personal possessions.

I’ve advised our father to have a will drafted to make sure his assets are distributed according to his wishes, but for whatever reasons, he seems reluctant to do so. Is there any other way to ensure our siblings don’t try to claim Dad’s interest in the house? Both my father and I feel it should pass to my youngest brother.

A. You rightly advised your dad to get a will drawn that completely spells out his wishes, and why he is reluctant, I don’t know, but tell him that unless he does, there is no way to guarantee his wishes will be granted without somebody challenging them. A very simple will suggesting where he wants his monies to go and to whom is the only legitimate way to handle this. It’s simple, inexpensive and there’s no excuse for him not to move ahead.

Q. I need a new bank. Any suggestions what to look for?

A. First thing, look for a bank or a branch that is convenient for you. The fact is that when you have to run across town to do your banking, you’re not going to use the bank to its fullest advantage. Second, you want to determine if it’s FDIC-insured. In all likelihood, it will be.

Beyond that, perhaps the bank is offering special incentives to become a member. Take a look at what it has to offer for people in your age bracket. I would check out one or two local banks in your area, or more, before making a decision.

Send questions to bruce@brucewilliams.com. Questions of general interest will be answered in future columns. Owing to the volume of mail, personal replies cannot be provided.

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