Graduate loans are an increasingly common form of unsecured personal loans that allow new graduates to consolidate debt. For many people this is an attractive way to firm up their finances when making that first foray into the world of working full time
What Is A Graduate Loan?
- Graduate loans are special programs offered by many banks to help new graduates through those first few months of a new job.
- They usually come with a lower interest rate than regular borrowing and provide an opportunity to consolidate other higher rate debts into one monthly payment.
- Eligibility varies from lender to lender, but you can usually obtain a graduate loan program during your first two or three years after graduation.
What Can I Use It For?
Graduate loans are most commonly used to consolidate higher rate debts, such as credit cards, and fund the necessary expenses of starting off in a new job. For example, most people need to purchase work-appropriate clothing and a graduate loan may be used to help with these expenses. Lenders may encourage you to consolidate other types of debt into a graduate loan, too, such as student loans or interest-free student overdrafts. We’ll discuss these items in more detail shortly.
As always, carefully evaluate your total debt load to make sure the amount will be manageable on your new salary.
Who Offers Graduate Loans?
Most lenders offer some type of graduate loan program. Programs vary widely, so it’s important to do some research and learn all you can about each program. The internet is a very useful tool, as there are numerous web sites that provide information and resources for your consideration.
What Are The Advantages Of A Graduate Loan?
The biggest advantage of a graduate loan is that it allows you to consolidate debt at a lower interest rate than you would otherwise find with regular borrowing. It is especially useful if you have other debts, such as credit cards, that have higher or variable interest rates. For someone just starting out in a new job, it can be very helpful to reduce the interest rates you’re paying and enjoy the ease of making just one monthly payment.
What Are The Disadvantages Of A Graduate Loan?
As previously mentioned, some lenders will encourage you to include student loans and overdrafts in your debt consolidation. Before you include these items in a graduate loan it’s important to compare interest rates and repayment terms to determine the best option for you. Student loans often have lower interest rates than graduate loans so it doesn’t make sense to consolidate them. On the other hand, overdrafts that were interest-free while you were a student may start incurring interest charges shortly after you graduate. Depending on the interest rate, you may or may not want to include them as part of your debt consolidation.
What About The Details And Fine Print?
Always, always read and understand the details and fine print of whatever graduate loan you choose. For example:
- Does the lender offer or require loan protection insurance?
- Are there any charges or fees if you repay the loan before the end of the loan term?
- Does the lender offer any repayment holidays (the option to skip a payment after a designated period) and if so, is there an associated fee?
- Can you select a specific due date for your monthly payment?
- Does the lender require you to make the monthly payment using a specific method such as direct debit from your bank account?
These are just a few of the things that lenders may include in their graduate loan agreements.
If you are in the market for a graduate loan, consider your options carefully. Research as many programs as possible and look for lenders who will tailor a graduate loan to fit your personal circumstances. If you take the time to learn all you can you’ll end up with the loan that meets your needs.
- - What do you need to know about student and graduate loans? First, it's good to know that the interest on these loans is much lower than a typical personal loan. However, it's also important to know that a student or recent graduate can become locked into a relationship with a lender through these loans, so careful choices is imperative.