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Student Loans

Should you Pay off Your Student Loan Early?

If you have a student loan then you could think that it would be a great idea to pay it back early. You may decide that you want to get rid of that debt, stop having to make those payments each month and be free of it all. You might think that it will be cheaper to pay it back early as it will be cheaper and so you will save money in the long run. However, a student loan has some differences to other loans and therefore the decisions made about paying them back early are different.

Often when we borrow money we are advised that we should pay it back as soon as possible. This is because it is expensive to borrow money and if we pay it back early, the interest payments are less in quantity and therefore we save that money. With a student loan things are slightly different.

A student loan does not have to be paid back if you are earning under a certain amount of money. Then there is repayment scale, so the more you earn, the more you repay until you hit a threshold. If you have not repaid the entire loan before 30 years are up, the rest gets written off. This is the current ruling, but as the rules are set by the government, they could change, particularly if the government changes hands. It is therefore really important to make sure that you have a clear understanding of the rules of the loan before you think about paying it off early.

If the above is correct, then financially it is likely you will better off not paying it back early. If you are not likely to pay it all back, if you do not have a job that pays that much, then if you it back early you could end up paying more than you would if you just continued with the instalments. If you are likely to be out of work for a while, perhaps to have a child, look after unwell relatives, take a long trip abroad or have difficulty finding a job, then this will all be time when you will not have to make the repayments. It is hard to predict whether this is something you might be doing in the next thirty years but you could do some rough calculations of how much you would need to earning and how many days you would have to be in work to see what the chances were of you paying back more if you pay it off in a lump sum compared to just paying the regular payments.

Of course, the cost may not be the only factor for you. You might not like the idea of being in debt and having a loan. This is understandable but it is worth noting that it is not treated in the same way as a loan. As the repayments come out through your tax code, you will not have anything on your credit report to show that you are making repayments on a loan so it should not have an effect on your ability to borrow money. The repayments are relatively small and calculated so that they are affordable which means that they should not place a big financial burden on you. Some debt is considered to be good because it works as a way that you can invest in your future. This is what many consider a student loan to be – an investment in your future. If you can think this way, it could prevent you from feeling so anxious about the loan.

So it is usually felt not to be good to pay a student loan back early. However it is always worth calculating this for yourself to see if you agree. It can be hard to predict what you may be doing in the future, but it is worth considering a few scenarios and looking at the figures to help you to decide. If you find that tricky then talk it through with someone or look online for figures that other people have done to help you. The longer you spend researching, the better decision you can make. Even if you make the wrong one, at least you will know that you spent lots of time and effort deciding.

Careers

Is a Career Development Loan Worth Getting?

A career development loan is specially designed for anyone that wants to study a course that will improve their career. This means that when you apply for the loan, you will need to provide details of the course so that it can be considered to see whether it is felt to be the right sort of course to fund. Examples of courses that would be funded are MSc courses or professional qualifications. The loan covers the cost of the course and a little extra for rent but it would not normally be enough to cover all living expenses for the time that you are studying. During the time that you are studying, you will not have to pay any interest or repayments, but once the course ends the interest will start accumulating and you will be expected to make monthly repayments. The repayment terms will be made clear to you when you sign up.
It is worth noting that this is not the same as a student loan. This does not cover an undergraduate degree and you have to start paying it back regardless of whether you find a job or not, at the end of the course. The interest rate can also be very high, this is not protected in the same way as a student loan and you will always be expected to pay it all back. It also counts as a loan repayment, rather than being taken out of your tax code in the way that a student loan is. This means that it can affect your credit rating, so if you want to borrow more money when you finish the course, you may struggle.

If you have the money to pay for the course then it is probably far more sensible to just do this rather than getting a loan. An exception to this would be if you get it interest free for the time you are studying and can then pay it all back before the interest period starts and not pay an early redemption fee for doing so. You would need to make sure that you checked the terms and conditions of the loan carefully and that you were extremely confident that you would have the money available to pay it back before you started being charged interest. A wise move would be to put the sum of money needed to repay it in a separate savings account so that you could more easily remember not to spend it.

Another thing to think about is whether you will get good value for money form the loan. Think about the course that you will be doing and whether you think that it will give you the knowledge that you need to improve your career. Consider whether there are the opportunities available for you to be able to use that training in getting a better paid job. You may feel that this would just naturally follow on, but that could depend. You may have to travel to find a job like this or you may need even more qualifications to be able to get a job. These options may be completely suited to you but they may not be. If you have local ties and do not want to move, then make sure that there will be local jobs available for you to do. It is also wise to check that the qualification will lead to a job. For example, when you get an MSc you may find that you actually will need a PhD in order to get a job.

It is worth thinking about how you will manage to make the repayments once you have completed the course. Find out how much they will be and how long you will need to be paying them for. Consider what other expenses you have, how much you will be able to earn after you qualify and whether this is something that you will be able to afford. Consider what might change in the future too. You may want to buy a home or start a family and having loan repayments to make could mean that these will more difficult to achieve. If you cannot find a job, you could struggle too, so make sure that you bear this in mind.

Emergency Loans

The Best Ways of Borrowing Money in an Emergency

If you need money really quickly, then there may be more options available to you than you think. It can be easy to feel that a payday loan will be your only option, but it is worth taking a little time to consider what all of your options are as you will find that there is a big different in cost and risk between them.

Before you even start you need to make sure that you definitely need to borrow the money. You may find that you will be able to manage without borrowing. Think about what you are buying with the money and whether you can go without or wait until you save up. If it is a bill you need to pay, then you may be able to delay paying it, but phone the company and explain that you need longer to pay and could they wait a bit longer. Make sure that you do not have any savings or spare money anywhere that you could use to pay for it.

You need to then have a think about possibilities for getting more money. Could you get an advance on your pay that could cover the cost? It is worth talking to your boss to find out. Perhaps you can sell some things and make some money that way or do some freelance work. There are many places online where you can look for small jobs and you get paid very quickly, which could help you raise enough to cover your emergency.

If you have no other choice but borrowing then think hard about the different options here. You could have a credit card you could use, but if you have maxed it out then it could be worth telephoning the company and asking them if they can extend your credit limit. An overdraft could be handy too but an unauthorised overdraft can be extremely expensive and so it could be wise to try to arrange an authorised one or extend the one that you have. You may be able to borrow from friends or family but sometimes this can cause problems between you so you will need to decide whether it could risk there being problems with your relationship otherwise. You may need to consider a loan and these do take time to negotiate. If you have some time, then talk to your bank and other lenders to see whether you can get some money for when you need it, it will depend on how long you can wait as to whether a personal loan, overdraft or credit card could be organised for you but also could depend on your credit record. If you have no luck and you have a poor credit record then you may have to rely on a short term loan. These are something which some people find really helpful and others really dislike. If you really have no other choice then it could be a useful option but they are expensive and carry big penalties if you do not pay them back on time.

All borrowing needs responsibility and it is wise to always consider all of your options and the consequences first. Many people can get themselves into worse financial problems because they borrowed than they were in originally. Make sure that you have a plan for paying back any money you borrow, that you know how much it will cost and that you are sure you will be able to balance your household budget after making those repayments. It will take a bit of time to sit down with some figures, bank statements and online research to figure out the best plan. It can often be tempting to act quickly, because you are in a panic and although this is totally understandable, it means that you could not make the best decision for you. Try to stay calm and analyse the situation rationally making a decision that will not only be best for you in the short term but also in the future as well. If you are not sure then talk it through with someone – a friend or family member could be good. However, if there is no one you feel that you can talk to then you can try free money counselling services which could help you to make the best choice for you.