Student payday loans are quite new to the market – even a decade ago, most providers would not consider lending to students because of their age and because of the fact that much of the paid work they had (if they had any) was part-time and/or seasonal.
If you are at college or university and you’re considering taking out a student payday loan, what do you need to know?
Student payday loans – key information
- What is a student payday loan?
- Students short of money are applying for student payday loans
- Are student payday loans the same as government-backed student loans?
- What are the risks with a student payday loan?
- Are there extra protections with a student payday loan?
- Are student payday loans my only option?
What is a student payday loan?
Student payday loans are a type of financial product intended for students at university (graduate or post-graduate).
Student payday loans must be paid back within 35 days of being taken out – there is one repayment to settle your account with your lender. If you miss the repayment, additional fees and interest may apply however any interest charged must not be charged at a rate higher than the rate agreed on the loan.
Students short of money are applying for student payday loans
Starting university is a very exciting time in any young person’s life. You’re finally independent, away from mum and dad, and supporting yourself. This new freedom brings with it a number of new responsibilities - most important of which is the need to take care of your own finances.
Many freshers start university off well, then they quickly realise how difficult managing money can be. But, with careful planning and the right budgeting skills, taking control of your finances doesn’t have to be too difficult and you won’t have to miss those all-important nights out either.
Let’s say that your tuition fee loan for the year is £9,250 along with a maintenance loan of £7,500. If you work, either during term time or during the holidays, you’d only need to save £3,000 for the year to get you by, according to The Complete University Guide. Here’s how:
|Rent (for a room only, shared bathroom accommodation in university residence)||£4,500|
|Electricity, gas, water||£250|
|Food and drink||£1,500|
|Books and course supplies||£300|
|Clothes and shoes||£600|
|Travel and transport||£500|
|Sports and leisure||£200|
|Holidays and presents||£500|
As long as you’re able to bring in that extra £3,000 per year somehow, covering the costs of university within your budget is a reasonably manageable task.
But for students trying to find additional income while juggling with academic life, it can be difficult to manage. That’s when many might think about taking out a student payday loan.
Are student payday loans the same as government-backed student loans?
Student payday loans are not the same as the loans you receive from the Student Loans Company. With your standard student loans, you only start repaying them after you’ve graduated and after you’ve started earning a minimum level of income.
With a student payday loan, you have to pay the entire amount of your loan back plus the interest on top within an agreed period of time – normally a maximum of 35 days after the money has been paid into your bank account.
What are the risks with a student payday loan?
As with all types of loan, student payday loans expose borrowers to a number of different risks, the main one of which is that, if your application is accepted and you then can’t pay back the loan, it may be very difficult for you to successfully apply for credit for a number of years.
The other major risk in applying for student payday loans is if you make multiple complete applications to different lenders within a short space of time. Whenever you complete a lender’s application form, the lend will run a full credit search on you. If there are multiple full credit searches on you within a short space of time, then:
- your credit score may go down
- lenders you apply to within the next 12 months may be more likely to reject your application because multiple full credit searches are a “red flag” to many lenders.
Are there extra protections with a student payday loan?
Student payday loan borrowers are protected by an extra layer of legislation covering something called HCSTC (High-Cost Short-Term Credit) loans. If you successfully apply for a student payday loan, then the following rules apply:
- you won’t be charged more than 80p per day for every £100 you borrow
- your lender will not charge you more than £15 every time an administrative fee is incurred (for example, if you miss your repayment)
- in total, your lender will not charge you more than the amount of money you originally borrowed in interest and fees
Are student payday loans my only option?
Universities and colleges offer hardship funds many of which offer grants that don’t require repayment – find out more here on the government’s website. You should approach your university or college before you apply for a student payday loan. There is also a useful page on the same site here on extra help you can receive if you’re suffering hardship as a student.
You should not apply for a student payday loan if you’re not entirely sure how you’ll repay the loan. Students can also seek help if they are in debt and they are concerned about their level of debt. Please click one of the following links for help, advice, and support – StepChange, PayPlan, National Debtline, the Debt Advice Foundation, the Money Advice Service, and Citizens Advice.
Students can apply for a loan of between £100 and £10,000 through GrowingPower. You’ll have between three months and 60 months to repay your loan. Our lenders will only consider an application by a student for a loan who has a regular income from employment.
To start your application, please click here. There is no charge for our service and you don’t have to take out any loan we find for you.