Should I Use My Student Loan To Pay My Credit Card Debt?

If you’re a student close to graduating one question you may be toying with is whether or not you should be using you student loan to pay for your credit card debt. The issues here can be a little complicated, so the following are a few pro and cons to using your student loan to pay off your UK credit card debt.

The pros

Probably the biggest reason why you would want to use your student loan to pay off your credit card debt is because the interest rate charged on your student loan is typically much lower than that you are being charged on a credit card debt. As such, it makes sense to save yourself some money by repaying your credit card debt from your student loan.

A second positive about transferring your credit card debt to your student loan is if you have problems repaying the debt in the near future you may be able to defer payments until such time as you have got yourself firmly on your own financial feet; for example, with a job. However, it is highly unlikely that any credit card provider is going to offer you such relaxed financing terms over such a prolonged and undefined period of time.

The cons

Appropriately, the biggest reason why you may not want to use your student loan to pay off your UK credit card happens to be the same reason why you would want – the rate of interest you pay on the debt. The difference here is that you may well be able to find an alternative which pays a lower rate of interest than you are being charged on your student loan.

A classic example here could well be the 0% interest credit card. You may well find that with graduation you are going to be in full time employment. As a fully employed member of society you may find that several credit card providers are happy to offer you a promotional period of 0% interest on your credit card. If that’s the case, you could transfer the balance of your existing student credit card to your new 0% interest credit card. Provided that the term of the promotion is long enough for you to fully repay the credit card debt back, before the regular rate of interest charged on the UK credit card providers outstanding balances kicks in, this could be the cheapest way for you to repay your student credit card debt.

Essentially, as with any form of credit card debt consolidation, when deciding whether or not you should use your student loan to repay your credit card debt the crux of what you really need to be considering is what the alternative form of debt you can have is where the interest rate you are being charged is less than that you are currently paying. In today’s competitive financial world, that may well involve a level of creative thinking – a skill you should have recently acquired while at university.