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The excitement of graduating
is too often tempered by big worries about student debt.
You may find that trying
to get established with a job and home, perhaps in a new location,
can be quite traumatic.
Don't worry - Graduate
UK is here to help you arrange your finances so they are less a
cause for concern.
Overdrafts
Try very
hard to keep within any agreed overdraft limit - unauthorised excesses
are usually charged at a much higher interest rate and you may also
incur penalty fees.
Credit
Cards
You may have a "flexible
friend", and credit cards can be very useful if used in the
right way. They are fine for short term needs - most offer an interest-free
period, and they do offer flexibility of repayment amounts. The
problems start if you allow the debt to build up, as most cards
charge high rates of interest.
If you have accumulated
a big credit card bill there are many cards which offer an interest
free deal on balances transferred . These are well worth exploring
but be aware that the free period is usually no more than six months,
after which interest will be charged at a normal rate - usually
between 10% and 15%.
Also be aware that some
cards offer the interest-free deal on purchases made during the
initial period, whilst others charge for these and allocate your
monthly repayments to the "balance transfer" portion of
your total balance, thereby allowing the interest to accumulate
on purchases.
Hopefully you will be
able to use the interest-free period to reduce your debt, but what
if there is some left at the end? You could transfer to another
free card, but if you do this too often it will be noted on the
credit reference agency records and may make new card companies
suspicious.
Leaving Uni is obviously
an important time to assess your finances and once you have a job
then its out with a calculator. List all your debts and note the
interest rates so that you can prioritise repayment. It can be well
worth amalgamating all your borrowing and arranging a personal loan.
Debt
Consolidation
Most lenders charge interest
at a rate which can be only half that charged on credit cards. You
can choose a period so that the monthly repayment is within your
budget and as most loans are at a fixed rate of interest, your repayments
will stay the same.
Look at the weekend financial
section of newspapers such as The Times and Daily Telegraph to see
which lenders are offering the best deals. You should also consider
any "early repayment penalties" in case you get a bonus,
or win the Lottery!
When
Times Are Hard
You may well encounter
difficult situations. Suppose you lose your job or can't work because
of an accident or illness...
Many lenders offer insurance
but if you are not protected you need to be realistic. Stay calm
and contact your lenders to explain what has happened and how you
hope to deal with your obligations.
Most will be reasonable
and agree to review the position in a few weeks. This is much better
than missing repayments and getting a bad credit record.
If things get really
difficult you can get help from your local
Citizens Advice Bureau. The Consumer
Credit Counselling Service is a charity which also offers
free help and advice.
Bankruptcy
The Student
Loans Company recently announced that about 900 of
their borrowers applied for Bankruptcy during 2003. This is much
higher than the previous year and is the last resort when dealing
with debt. Some people think it is a good way to solve their financial
problems and gain a fresh start.
Bankruptcy is not an
easy option and is something you should do your utmost to prevent.
There are very real long term consequences and even after being
discharged in 2 or 3 years you will have big problems getting any
credit or a mortgage.
If you are lucky enough
to get credit in the future, future interest will usually be charged
at higher than normal rates and you will not be allowed into some
professions such as Law or Accountancy.
Top tips from Graduate UK:
Plan
realistically
Look for cheaper options
Always deal with a problem positively
Never sign a Credit Agreement
before reading the details.
Mike Tyson claims to
be £20 million in debt - ouch!
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