Avoiding Debt

Avoiding Debt

It is best to avoid credit whilst at University - it can become unmanageable on a student income, and leave you in debt.

  

Why Credit is tough to shift

Say you spend £100 on your credit card: if you only make the minimum payment (say £5), your balance is now £95.  If your monthly interest rate is 2%, you carry forward a balance of £96.90 – you’ve only reduced your debt by £3.10.  If you only make the minimum payment each month, it could take over two years to clear your £100 spend, and it will actually cost a total of around £130!!

You’ll need to consider things like the terms of a loan or credit card and interest or APR that you repay. Equally, it might also be worth weighing up whether you need credit at all, or whether you might be better saving up for the item.

 

Credit Cards

Try to avoid using credit cards because of the high rates of interest charged. If you do use one, compare interest rates charged using comparison sites such as:

www.uswitch.com
www.comparethemarket.com
www.moneysupermarket.com

Make sure you pay it off every month to avoid charges.

 

Payday Loans

Payday Loans are short term loans that normally last no longer than one month and are repaid at your next wages payday. They can seem attractive because they are normally very easy and quick to apply for and in many cases the money is received into your account only a few hours after application. However they charge extremely high rates of interest – average 2615% APR (based on average fee of £29 per £100 borrowed.) The cost of borrowing can mount up quickly, especially if repayment is late or you borrow repeatedly, making the amount you repay much larger than the original amount borrowed. In the long term Payday loans can make your financial situation worse.

 

Independent Finance Companies

Independent Finance Companies provide loans often targeted at students and these can be useful for students without access to statutory student finance. However students are advised to check and compare interest rates as well as terms and conditions if considering applying for a loan.

Students should be particularly aware of independent finance companies masquerading as official student loan providers. These companies advertise on social networking sites known to be used by students. They can charge extraordinarily high rates of interest that could never realistically be repaid by anyone on a student income and should be avoided at all costs.

 

Loan Sharks

  • Loan sharks are illegal money lenders which should not be used under any circumstances.
  • Anyone can be a victim of a loan shark – your family, friends, neighbours and even you.  
  • It’s not always easy to spot a loan shark as they come in all shapes and sizes and will at first appear friendly, just part of the community. It is when you can’t pay that they will turn on you.  
  • A loan shark is someone who lends cash as an unauthorised business.    
  • If someone is struggling to pay a debt the loan shark will resort to threats, violence and intimidation to get what he thinks you owe, even if the debt has been paid off several times over.
  • A loan shark will typically have little paperwork and, will add penalty charges for late payments. Sometimes they will add random sums to the bill.  
  • Many victims keep paying because they think they can afford the agreed weekly sum, but they don’t realise how much their continuing weekly payments add up to or they are too afraid to stop payments.
  • Often refuse to tell the borrower how much they still owe, when they will finish repayments.
  • May take items as security- including passports, bank cards and driving licences.
  • Our advice is that you should never go to a loan shark. They do not provide a community service; they are simply out to make money.

Report a loan shark

If you spot a loan shark or you’ve borrowed money from one you can report them anonymously.

Contact: Illegal Money Lending Team:

Email: reportaloanshark@stoploansharks.gov.uk

Telephone: 0300 555 2222 24-hour service

Text a report to 07860 022 116

Report online at: http://www.stoploansharks.co.uk/  

For more information see: https://www.gov.uk/report-loan-shark and http://www.stoploansharks.co.uk/  

 

If you are struggling financially and having problems meeting basic expenses, contact the University's Money Advisers for advice and support.

You may also be able to apply to the Access to Learning Fund.