Looking after the veterinary profession

Student Finance - Borrow Money

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"We educate our students into debt, but never about debt."
                                                         Martyn Lewis 

Where to Borrow First

Most personal finance experts advise the following strict order of priority for borrowing money:

1.  Official Student Loans

Read moneysavingexpert.com's Student Money-Saving

2.  Student Bank Account Interest Free Overdrafts

The High Street banks usually offer 0% on overdrafts up to a certain limit to those that they hope will be potential high earners and will stick with them for life.

The reason this option is not first is that after you graduate the banks will start charging an expensive commercial rate of interest, whereas student loan debt always remains cheap.

To find the right bank account for you, see moneysavingexpert.com's Top Student Bank Accounts 2011/12

3.  Professional Development Loans

What are they?

A Professional Development Loan is a bank loan to cover fees, living costs or specific expenses. Repayments are deferred until after you graduate and include interest which is also charged whilst you’re studying. Professional Development Loans are available to UK residents only.

Is it the same as a Career Development Loan (CDL)?

No. You pay all the interest on a Professional Development Loan whereas the government pays the interest on a CDL during your studies. If you can get Student Loans you can’t get a CDL but you may be able to get a Professional Development Loan.

Where can I get a Professional Development Loan?

You will have to do some research to find out which banks offer professional development loans with the current economic turmoil, banks change policy fairly frequently. – Each will have a different name for these loans eg Natwest Professional Trainee Loan.

Before taking a loan it’s important to shop around as interest rates, fees and eligibility for study loans can vary between banks.

What should I check when comparing different loans?

  • 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 instalment 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 (eg 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 vet 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 veterinary science 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 studies but may require evidence of previous study or employment.

Where can I get more details about Professional Development Loans?

Check the bank websites and more detailed information and leaflets will be available from bank staff. If they don’t seem knowledgeable, ask for contact details of the nearest student or graduate account manager. Bank branches which deal regularly with university students may be more familiar with study loans.

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)

    • It is a good idea to provide details of how you intend to repay the loan. Newspaper articles on veterinary salaries or salary information from BVA 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 Professional Development Loan.

4.  All Other Debts (To Be Avoided)

If you don't have an income you can't repay the debts. This means the interest will compound and build quickly leaving you owing serious cash.

A credit card can help in a cash flow crisis (e.g. when you’re waiting for a student loan instalment or wages). But pay it off in full as soon as your awaited money arrives.

Spread the costs of expensive purchases (eg textbooks) on a card that offers 0% interest on purchases for the first 6 months. Split what you owe into 6 instalments and pay off 1/6 each month.

Don’t make minimum repayments only or you won’t clear the debt before interest kicks in. Note the date when the 0% rate expires in your diary, pay off the debt before then and CANCEL THE CARD!

If you have frequent cash flow crises and you're spending more than you can afford - see our Manage Money page.

Read these warnings about credit cards!

  • High interest rates (10 - 20% APR) make credit cards an expensive way to borrow money

  • Unlike student loans and overdrafts which are repaid after you graduate, credit card bills arrive monthly

  • Credit card companies charge around £25 for missed / late minimum payments. And if your payment bounces, you’ll pay £25 to the card company plus £30 in bank charges

  • NEVER withdraw cash by credit card. If you get sent credit card cheques shred them. Interest rates on these and cash withdrawals are exorbitant: 20 - 30% APR from the day of withdrawal - there is never an interest-free period

  • BEWARE of payment protection insurance. It will significantly increase your monthly repayment and as a student you are unlikely to benefit from its ‘protection’

  • 0% deals rocket to ‘normal’ high interest rates after the initial deal expires

  • Many students miss out on the best interest rates because of a lack of credit history or a poor credit rating.

  • Getting turned down when you apply for a credit card damages your credit rating – do this several times and you won't get a mortgage! Do your research first and find out if you are likely to be turned down.

Key Point
Never withdraw cash by credit card - interest is very high and there is never an interest-free period.

Part of the content of this page is reprinted with kind permission of the Royal Medical Benevolent Fund from www.money4medstudents.org