Why A Graduate Loan Might Be Right For You

Studying at university can be an expensive business. That expense doesn't end when students have graduated. Once students have left university, they need to find jobs, buy suitable clothes, find somewhere to live and pay the bills until they start earning. With student loan payments at an end, they need to find some way to meet their expenses. This is where a graduate loan may be an option.

What Is A Graduate Loan?

A graduate loan is a loan offered by several banks to help people meet the expenses they incur when starting a new job. Graduate loans are unsecured personal loans which are usually at a lower interest rate than other loans. They are usually available to people within two to three years of completing a university course.

How Much Can I Borrow?

Loan offers vary widely among banks. Most allow people to borrow between £1,000 and £10,000, though some offer a higher maximum of £15,000. Typical repayment periods are between five and seven years, though some lenders offer a repayment period of only two years and some offer as much as ten years.

Graduate loans are usually offered at a lower annual percentage rate (APR) than normal unsecured loans. Typical APRs are between 6.9% and 14%. Some banks offer a payment holiday of up to 12 months, but interest continues to accrue during this period, so you will end up with even more to pay back. And if you're lucky enough to get a well paid job, think hard before deciding to settle the loan in full. Most banks charge an early settlement fee to compensate them for lost interest.

What Can I Use A Graduate Loan For?

In addition to covering the expenses incurred when starting a new job, many recent graduates use the loan as a way of consolidating credit card debt. This is because typical APRs are much lower than those for many credit cards. This is not a good option for paying off the student loan, though. With an interest rate pegged to inflation, the student loan repayments will be much more affordable.

Who Qualifies For A Graduate Loan?

Most banks require applicants to be UK residents over 18 and to have a job offer. With some banks the amount you can borrow is limited by the amount borrowed on any of their previous student financing schemes.

Other Loan Options

Many banks also offer interest free overdraft facilities to help people pay back some of the debt they incurred as students. There are also a number of graduate financing schemes aimed at graduates going into particular professions such as medicine, dentistry and law. Whichever scheme you choose, it is advisable to read the small print before tying yourself into a graduate loan deal. It may also be worth checking with your new employer to see if that company offers employee loans. This could end up being a cheaper option for graduate financing.