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graduate loans

Graduate Loans Explained

Graduate loans are offered by banks and loan providers specifically to graduates as a personal loan. Graduate loans work in the same way as unsecured personal loans. However, banks normally offer more generous interest rates to graduates, and better loan options in general with student loans.

How do graduate loans work?

  • In order to secure a graduate loan, you usually have to already be an existing customer and hold a checking account with the bank or loan provider through which you are applying for the graduate loan.

  • These graduate loans have a repayment period of anything between 6 months and 10 years.

  • You are required to make regular, usually monthly, repayments, ideally by direct debit on your graduate loans.

  • The interest charge on graduate loans is shown as an APR or Annual Percentage Rate.

  • Most times, you will be required to pay a fixed interest on the amount borrowed from the start of the graduate loan period. This effectively means that your repayments will remain stable and the same throughout the term of the student loan.

  • There are, however, some graduate loans which are based on variable interest rates.

  • Shop around for the best rate on offer for your student loan that will suit the amount you need and the loan repayment period that will best suit you.

Do I need payment protection insurance for graduate loans?

It is not compulsory to take out insurance for graduate loans or student loans.. However, insurance may give you peace of mind if a situation should arise that will prevent you from working such as redundancy, unemployment, accident, illness, or death.

It is important to read your insurer’s terms and conditions carefully to ensure the protection provided will meet your needs.

Some important considerations regarding graduate loans  

  • Typical Annual Percentage Rate: Be aware that you may not be eligible for the advertised typical APR on graduate loans. The rate you are given may depend on your credit rating which is a score determined by a credit ratings agency.

  • Early Settlement Penalties: You should be encouraged to repay your graduate loan or student loan as soon as you can. By doing so, it is possible to make significant savings early in interest payments. However, be careful if you decide to pay your graduate loan off completely as some graduate loans apply penalties to those wishing to clear their graduate loan debts earlier than originally agreed. Always read the small print.

  • Deferment Periods and Payment Holidays: It is possible to ask for a deferment break between when you receive your graduate loan and when the first repayment is due, beyond the standard month. This may give you a break from regular repayments. However, do not forget that your loan provider will continue to charge you interest over this period which will increase your overall borrowing. It is also possible to ask for payment holidays, but similarly, you will still incur interest charges, thus increasing the size of your initial graduate loan.

  • Same-Day Funds: Certain loan providers offer same-day-funds facility for those applying for graduate loans. Many find this an attractive service as you can get your hands on your cash on the same day that your loan application is approved. However, bear in mind that you can be charged for this convenience, as there is normally a fee for this service.

  • Direct Debits: Most loan providers require that you set up a monthly direct debit to guarantee that you will repay the instalments on your graduate loan or student loan. You need to make sure that the money is available for payments on the date the direct debit is due. Otherwise, you may be charged a penalty for missed payments on your graduate loan.

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