Introduction to Postgraduate Borrowing
With more and more funding options available to postgraduate students and many of these students self- funding their Masters or PhD study it is important to consider how these loans differ from the Student Loans Company loans and grants you may have received in the past. Not knowing all the costs involved before you agree to a loan could result in you paying more than you need to in order to finance your postgraduate study.
Below are some tips you can use as a checklist to look out for to ensure the loans are affordable and suitable to your circumstances.
We cannot advise on individual products or offers by lenders, however please take a note of our tips below to ensure you are aware of all of your options.
How much do I need?
Work out how much you need using a budget; you don’t want to borrow too much and pay interest on a loan you don’t need, likewise you don’t want to borrow too little and need to apply again to borrow more.
Go to our Cost of living in London webpage to see how much money our students say they need to live and study in London.
Is there a restriction on what I can use the money for?
This is called intention of use and some lenders will lend you money only to pay for your tuition fees or your living costs, whereas others will lend you money for both tuition fees and livings costs on a percentage basis.
When you make your application you will need to know how much you want to borrow and what you will use the money for.
Is their loan available for your course?
Some lenders will only want to lend to students undertaking a Master’s course, whereas other lenders will also lend to students undertaking Doctoral-level study. Some may only wish to lend to those undertaking certain courses, such as Business.
Make sure the course you intend to do is offered by the lender before you apply.
Who receives the money from the lender?
Some lenders will want to give the money directly to your university to either pay your tuition fees directly or for your university to pay you your money for your living costs.
Make sure you find out who will receive your money so you can make the right arrangements with your university and take into account any time delays.
What are the Repayment options?
Most lenders will want you to start repaying your loan as soon as you complete your course. However, there are some lenders who will offer you a break from repayments, although please be aware that taking these breaks may affect your credit rating and interest will still be being added to your balance.
- Grace period- some lenders may offer a grace period whereby you can delay the start of your repayments for a period of time after you complete your course.
- Payment holidays- some lenders will allow you to take a break from making payments during your repayment period.
- Overpayments- some lenders will let you make overpayments to shorten your loan duration and reduce the overall interest you will pay, however this may be subject to an early settlement fee.
- Monthly repayment amount- unlike your Student Loan Company loan your repayments will not be income contingent.
You will be told the total amount repayable and your monthly repayment amount will be set at the time you take out your loan.
Are there any other fees involved?
- Arrangement fee or Set Up fee- some lenders will charge you an arrangement fee which will be a percentage of the loan you take out and could vary between 2.5% and 6.5%. Some lenders may have both an arrangement fee and an administration fee.
- Maintenance fee- some lenders will want you to start making repayments as soon as you receive your loan, however these are usually capped at a lower amount than what your repayments will be after you complete your course.
- Early repayment fees- a lot of lenders don’t charge a fee if you repay your loan early, however some still do, so make sure you ask about this when taking out your loan.
- Late payment fees- some lenders will charge you a fee if you make you repayment late or miss a payment. If you are struggling to make your repayments then get in touch with your lender as they will help you come up with a sensible repayment plan before you miss a repayment date. Missing your repayments will impact on your credit report and may make it more difficult for you to obtain credit in the future.
If you are struggling then you can contact a number of free debt advice services:
What are guarantor loans?
If you don’t have sufficient credit history, or if you are a non- UK resident then you may be offered a guarantor loan whereby someone with sufficient credit history or who is a UK resident will be asked to guarantee your loan.
They will be known as the guarantor and if you default on the repayments of your loan, the guarantor will have to make your repayments.
What are representative examples?
A lender’s representative example will show you the typical costs associated with their loan. This is something that they must provide so that you can make an informed choice.
The information given should be the representative APR, the assumed credit limit and any fees associated with their loan.
Representative APR is the Annual Percentage Rate and takes into account all charges associated with a product in addition to the interest rate.
What if I have a complaint about my lender?
If you have a complaint about your lender that cannot be resolved directly you can get in touch with the Financial Ombudsman Service for help resolving your complaint. If they decide that you have been treated unfairly then they have the legal powers to put things right.
Examples of some providers
These providers specialise in student loans. As most students do not have a long credit history they will also use information about your course, such as expected salary and course length.
- Future Finance
Payday loans are high cost, short term loans. They often charge more for a month of credit than credit cards do for a year and when expressed as an APR most payday loan work out as over 1,000% APR.
Please note that borrowing from payday lenders will negatively impact your credit rating.