Northumbria Gliding Club

Sometimes we are forced into making difficult financial decisions. It is always wise to think them through for some time before committing to them. It can be difficult to do this at times, if we need the money quickly, for example, we can tend to panic and rush our decision making. It is wise to try to slow down and ponder things first. For example if you are deciding whether to have both a credit card and an overdraft.

Costs

Firstly it is worth thinking about the cost of having these loans. All loans cost money and you need to think about the most cost effective way of borrowing. A credit card is quite expensive but an overdraft is even more so, particularly an unauthorised one. It is worth looking at different credit cards and overdrafts to compare the prices and see how much each will cost you.

Both of these types of lending do not require large regular repayments. The credit card needs a small minimum repayment each month but a large balance can remain outstanding. The overdraft will be automatically repaid when funds go into the bank account, but will remain until those funds are paid in. the costs of these two loans will therefore depend on how long it takes you to repay them and are very variable. If you repay quickly, they can be pretty cheap but if you take a long time to repay them, then they will get really dear. If you have both of them, then there is a chance that you will use both to their max and accumulate a lot of costs.

Risks

There are risks with these types of borrowing. As there is no repayment schedule, then it can be tempting to not worry too much about repaying them. This means that the debts can remain unpaid for a long time. Each day that you keep the debt will cost you money and that will build up and up, making them very expensive.

There is also the risk of repeat borrowing. With a personal loan, you organise it with the lender, wit and while, get the money and the repay it in full. With these loans they are always available so you can use them to borrow money whenever you wish until you have borrowed up to your credit limit. So you could just pay back a little bit and then borrow again, over and over again. This will end up costing a lot of money in interest and fees and you could end up finding that you owe so much that the interest payments are no longer manageable.
Therefore you need to be sensible and only take out this type of loan, or both, if you are confident that you will be able to repay them. Consider whether you will be self-disciplined enough to make sure that you pay off the loans as soon as possible to keep the costs down. Also think about whether you will be sensible and make sure that you do not spend extra money because you have the loans available to you.

Repayments

It is wise to also think about how you will manage the lack of repayment schedule. With an overdraft the loan will be paid off when you get paid, so this will be easy but you need to make sure that you do not get into the habit of borrowing month after month. You will need to be really frugal and budget well so that once that debt is repaid you do not accumulate it again.

With a credit card you might be best to set up a direct debit to repay the full balance each month. Then you will never get into debt with it and you will not have to pay any interest. It can be tempting just to repay the minimum balance but try to avoid doing this unless you really have to as you will end up paying high costs as a result.

If you are trying to manage both a credit card and an overdraft it could make things harder. You will need to work hard on repaying both and making sure that you do not overspend on your credit card and from your current account. With so much credit available it could mean that you are more likely to be tempted to spend some of it and get into debt. So think carefully about whether you should have both forms of credit. It will very much depend on your personality and how well you manage money as to whether you feel that it is a good idea to have both or not. You should know how well you have coped with debt in the past and what you current financial situation is, which should all help you in deciding whether to do this or not.

A student loan can be a source of worry for many graduates. You will do a course and enjoy it and then get a job. The loan repayments come out of your tax code so you probably barely recognise them. However, when you get that letter telling you how much you owe and what the interest is, then this can be scary, but it is best to ignore that letter. You have no idea if you will even pay back all of the loan and as the repayments are designed to be affordable, as you only repay once you are earning above a certain threshold, you really need never worry about the total cost. So whether you get a personal loan, should not be effected too much, but you can consider a few things.

Managing repayments

Your ability to manage repayments may slightly change due to having a student loan. If you are earning above the threshold, you will be making repayments through your tax code. This will mean that your take-home pay will be slightly less than others who do not have student loan repayments to make. This is worth considering.

However, your repayments, as they are in your tax code, will only increase if your income goes up and will go down if your income goes down. This means that they are much easier to manage than normal loan repayments which will stay constant regardless of your income. The loan repayments are also pretty small and so are not a significant chunk of your income.

Therefore you should not worry about personal loan repayments in the context of your loan repayments as they will make very little difference.

Being accepted for a loan

Your chances of being accepted for a loan should not differ much if you have a student loan. This is because the repayments are income linked and small. Even if using a guaranteed payday loan. Therefore you should not find that a lender will be concerned about them. They will look at your income in order to decide whether they want to lend to you, but your gross income figure will not be impacted by your loan, it is only your take home pay that is changed. Sometimes your take home pay is considered when looking at loan applicants, but this is normally only for mortgages and not for personal loans.
A modern student loan will not show up on your credit rating, however if you have an older loan from 1990-1997 then it will show up if you have missed a repayment or paid late. This means that you will need to be careful and if you have made mistakes in the past then you might pay the price for them. Do check your records thought and ensure that your credit record is correct and if they say you missed a payment, make sure that they are correct. However most students with loans will fall into the latter category and not have to worry about doing this.

Normal loan questions

Regardless of whether you have a student loan or not, you will need to ask yourself a series of questions before taking out the personal loan. It is really important to think carefully about the loan and do lots of research before taking one out.

You need to think about whether you can afford the loan. It is important to consider whether the cost of the loan is too high but also whether you can afford the repayments. If you are making repayments to a student loan then this will decrease your income a bit so may have an impact. You should also make sure that you do a lot of research and make sure that you are getting the best loan for you. This means the best type of loan to suit your purpose but also one that you can afford that lasts an amount of time that suits you and has manageable repayments. It is important to compare different loans so that you can be confident in your decision.

A loan is a big decision and t is worth doing all this research before you take one out. A personal loan could last for five or more years and so it is a big commitment. You want to make sure that you are confident that you will be able to cope with the repayments all through these years. Try to think about what changes might come about and how this might impact your ability to repay the loan. It can be hard to predict the future but it is worth just thinking about your future plans. Consider what might happen if your family circumstances change, if your job changes or you get made redundant, if your family grows or things like that and how that might impact your ability to make the loan repayments.