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Student loans: not as bad as they are painted
Student loans are a necessity for almost all students. And while starting your working life with a large debt is hardly ideal, student loans are one of the best types of loan available.
The APR of a student loan is the same as the rate of inflation. So effectively, the size of your debt never increases. If your debt at the end of your time as a student will buy you a small car, then after 10 years, although the amount of money may have increased it will still buy you a small car, as the price of the car will have increased at the same rate.
No other bank loan will have such a low APR, because the student loans company does not make a profit while all other loan providers must.
A student loan is the wisest debt to have if you must have one. After you graduate, it’s up to you to make sure you get the help and advice you need to get out of debt.
Tagged debt, Loans, Student Loans
Top 10 Tips to Stay Debt Free
1. Never let your expenditure exceed your income. Use a budget to work out how much you can afford to spend on the various costs of living and stick to it!
2. Write down everything you spend. It’s surprising how much money you can waste on non essentials and not even remember where it went.
3. Unless you are possessed of sufficient discipline to use a credit card sensibly, it’s better to stick to cash. If your weekly budget for shopping is £60, for example, then take £60 in cash with you and leave the debit and credit cards at home. That way you can’t over spend. This is also a useful tactic on nights when beer can impair financial judgement!
4. Be leary of credit. If you can’t afford it now, odds are you won’t be able to afford it later. If you must use credit, check the APR, repayment period and possible penalties for late or missed payments.
5. Don’t carry money or credit cards “just in case”. That way you won’t spend on autopilot.
6. Never buy new when second-hand will do. Besides being better for the environment, buying second-hand is better for the purse.
7. Be a saver! Save up for planned purchases and treats. Shop around for good interest rates on savings accounts and watch the pounds mount up. It doesn’t matter if it’s only a small amount saved each month. It will add up.
8. The supermarket is not your friend! Supermarkets market their goods with great care and skill to seduce you into thinking you’ve got a bargain. If you didn’t need it in the first place, then it’s not a bargain. Write a list and stick to it.
9. Buy only what you need. Particularly for smaller families, buying large amounts of goods because they work out cheaper can be counter productive. Many products have limited shelf life and will end up going off and being wasted before they are consumed.
10. Enjoy your cash! Being free of debt and the “feel good” factor of some savings frees you up to really enjoy what you’ve purchased, rather than worrying about the debt which it has entailed. Go out and enjoy the debt free world.
What on the earth does that stand for?
What is an IVA? The latest in a long line of Three Letter Acronyms put there to confuse us. And to tell us there are choices, even when we think we’re way out of our depth. But even when you decode it to Individual Voluntary Arrangement, you’re typically none the wiser. What doe it mean? Can it help? Is it a con? I’m as big a sceptic as they come, but I’m prepared to accept that IVA is a good way out for those in really sticky situations with their finances.
And it’s not a new thing – it’s been part of the insolvency act of 1986, so it’s well into its young adulthood by now, and starting to see plans for further reform to allow accessibility for a two-tier system, for differing levels of debt. So where’s the catch?
The catch is, in simplest terms, that you have to be severely in debt to end up needing one. And it’s not a get-out-of-jail-free card by any means – your credit rating will be destroyed, your self esteem will be pretty low, and you’ll have had to fight to keep your house, car, anything of value, just to get into a situation to need one. But the IVA is there to help you when things really are desperate. It allows you to write off up to 75% of your debt, and rehabilitate yourself with the reduced repayment, without having to declare bankruptcy, and start your life all over again.
So if you’re in a position of needing such drastic financial support, get some advice about the option of an IVA – don’t assume bankruptcy as your primary option. And do a bit of hard thinking about how you’ve ended up in this position, or it’s hardly going to help you at all. Cheerful stuff!