A Study Loan is a private loan to cover fees, living costs or specific expenses (e.g. funding an elective). Repayments are deferred or reduce until after you graduate, and include interest which is also charged whilst you’re studying.
Commercial Study Loans
There are a number of companies such as Future Finance offering loans to students. These are commercial loans at commercial rates and the interest can often be high. They do however offer token repayments while you are studying. They may require a guarantor.
Think carefully about the affordability of loans like this before applying. You may end up with large repayments which total a lot more than you borrowed.
What to look for in a loan
Before taking a loan it’s important to shop around as interest rates, fees and eligibility for study loans can vary between banks. Listed below are things you should look for if you are seeking any type of loan.
- The annual percentage interest rate (APR) – this may be fixed or variable (e.g. ‘floats’ 5% above the Bank of England base rate). Remember that a variable rate will currently be lower than the fixed rate, but is more risky as interest rates can rise
- Is the loan given in installment or as one payment? Interest is charged from when you receive the money so you should immediately transfer the loan to a high-interest savings account or an ISA. Only keep the minimum you currently need in your current account
- Is there an arrangement fee? Check if it is paid upfront or added to the loan (where you will also be paying interest on it)
- How many years do I have to repay the loan? Make sure that repayments seem affordable (remember you will be paying off student loans as well). The longer the repayment period, the more interest you will end up paying in total
- Is there a redemption (early repayment) fee? You can save a lot of money in interest by repaying the loan early but the bank may hit you with a fee for doing so
- Do I need to hold my main account with the bank offering the loan?
- Are there any other fees or requirements (e.g. life insurance)?
- How long will it take to arrange the loan? You may be able to apply before you begin your studies if you already have a place at med school but always allow plenty of time
- Can I take a loan from my first year of study? The rules vary between banks. Younger students who are studying medicine as a first degree are not usually eligible until the later years of their course. Most banks allow graduates or mature students to take out a loan from their first year of medical studies but may require evidence of previous study or employment.
Tips on applying for your loan
Make an appointment with the bank (preferably with a student or graduate account manager). In this meeting be prepared to explain in detail why you need to borrow money. Use the meeting to get a clear explanation of interest, fees and repayment details. If you are unsure or unhappy with any aspect of the loan, don’t feel pressurised into signing anything – take away the information to read in your own time.
Don’t forget to bring these along to your appointment:
- A completed application form and any documents requested by the bank
- A detailed budget and evidence of your current or prospective income (student loan statement, evidence of any bursaries, pay slips, bank statements showing other income or savings)
- If possible, details of how you intend to repay the loan. Salary information from NHS Careers might help to convince the bank that you are a safe investment
- The bank’s own leaflet or website information about the loan to prove that you meet the eligibility requirements. Bank staff are not always clear about rules for graduates and mature students – confusion can be avoided if you have the information handy
If you have a history of unpaid debts, too many outstanding debts or even no history of borrowing you could be refused a Loan. You can check your credit rating – see the links below.