Student loans are generally not considered bad in the UK, as taking out a student loan could be the difference between receiving a quality education or not. While there are a few private lenders providing student loans, they are generally taken out from the Student Finance NI. In other words, they are government-backed funds. Some people might worry about student loans, but they do not work the way as loans for bad credit in Ireland. Student loans are paid back only when you earn more than a threshold limit, and you really do not have to discharge the full debt. After some time, the loan is written off.
Student loans are also offered by credit unions in order to meet tuition fees but remember that they might not wait for you until you start earning money, though they offer flexible payments. They write off student loans after 20 to 25 years or when you retire, depending on your repayment plan. It is enjoined that you should prefer to borrow money from the Student Finance NI to meet your education expenses.
Here are a few things about these loans that you must know:
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No upfront payment is made
If you cannot afford the cost of your degree programme, you should not worry about it. You can take out a student loan without paying any penny upfront. The Student Finance NI funds tuition fees and your student living costs.
If you borrow money from credit unions and private lenders, your student loan is due for payment immediately after the approval, but government-backed student loans are not paid down unless you complete your degree programme.
You are to pay only when your income is beyond £501 a week.
There are various types of student loans. You cannot choose any of them because it depends on where you live. You will be on plan 1 whether you are pursuing an undergraduate or postgraduate programme in Northern Ireland. Bear in mind that you will start making payments only after earning more than the threshold income. You should be earning more than £501 per week in order to start making payments. If your income level drops down the line, you will stop the payment.
Student loans are paid down at a fixed rate, which is 9%. It is the 9% of the amount above the threshold income, which is £26,065 per year. So, whether your debt is £25,000 or £50,000, you will be paying up to £354 per year if you are earning up to £30,000.
Earnings do not just include your regular pay but also bonuses, earnings from a pension, investments, etc. So, if you receive a bonus in a particular month, your student loan payment for that month would be higher.
You can make voluntary repayments
While other loans, such as payday loans and unemployed loans with no guarantor prevent you from early settlement, you can make additional payments towards student loan repayments. Early settlement fees are charged in case of other loans, but you are completely free to make additional payments without fear of being charged any penalty.
However, it is still recommended that you should consider your financial circumstances very carefully before signing up for a voluntary repayment plan. There is no point in making this agreement if you are not certain about your capacity to discharge the debt in full. Seek any professional advice if you cannot make up your mind.
Student loans do not affect credit scores
Student loans do not work the same way as any other loan or student loans from direct lenders or credit unions. Government-backed student loans are not recorded on your credit report. Since they are not recorded in your credit file, you do not have to bear the risk of losing your credit points.
Even non-payments of student loans do not affect your credit rating. However, at the time of applying for a mortgage, your lender might take into account how much you owe student debt. This will influence their decision to lend money.
The debt takes 25 years to be written off
You are required to pay off your student debt until the whole amount is cleared or you have passed 25 years since you graduated, whichever happens first. This means that student loans are written off faster than they are anywhere else. However, this rule applies only when you take out a student loan after the 2005-2006 academic year.
Loans before that financial year are written off only when you turn 65. Loans are also written off when you are not in a condition to earn money. If you die before the settlement of the debt, this will not be passed to your family members.
Apply for these loans to make a functional budget
You should apply for student loans at the beginning of the academic year. In other words, it is a good idea to apply for these loans before the session begins. Your chances of receiving money quickly are high when you apply for them earlier. However, it does not mean that you will be rejected if you apply for them later, but there would be some delay in receiving money.
Student loans cannot prevent you from getting a mortgage
Student loans do not appear on your credit file. They do not affect your credit rating. When you apply for a mortgage, your mortgage lender will peruse your credit report. Since it does not record them, it cannot prevent you from applying for a mortgage. However, they might be curious to know if you have a student loan. If you are making monthly payments, they will assess how much a mortgage should be approved.
The final word
There is certainly nothing wrong with taking out a student loan. Of course, if you cannot afford the cost of your degree programme, you will have to rely on student loans. These loans do not add a burden to your budget. You pay them off only when you earn more than a certain limit. Student loans are not a bad idea if they are government-backed loans.
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