{"id":261,"date":"2022-02-18T17:38:47","date_gmt":"2022-02-18T17:38:47","guid":{"rendered":"https:\/\/blogs.kcl.ac.uk\/moneymentors\/?p=261"},"modified":"2023-02-09T13:42:28","modified_gmt":"2023-02-09T13:42:28","slug":"loans","status":"publish","type":"post","link":"https:\/\/blogs.kcl.ac.uk\/moneymentors\/2022\/02\/18\/loans\/","title":{"rendered":"Loans!"},"content":{"rendered":"\n

For many people, loans are an essential part of their finances at some point in their life. Loans can be part of how we finance big purchases such as buying a house; many of you will have already taken out a student loan to cover the costs of your tuition and living expenses whilst at uni. That\u2019s why King\u2019s Money Mentors are here to make sure you know your APR from your FCA. In this blog post, we\u2019ll aim to teach you about Student Loan Repayments, Credit Cards, Mortgages, and Loan Sharks, as well as how you can find some help if you do find yourself in debt. <\/p>\n\n\n\n

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Credit Cards<\/strong> <\/p>\n\n\n\n

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Photo by Patrick Tomasso<\/a> on Unsplash<\/a><\/figcaption><\/figure>\n\n\n\n

Whilst debit cards pay using money directly from your own bank account, credit cards allow users to buy things on credit (i.e. borrowing money with the aim of repaying it later). <\/p>\n\n\n\n

An \u2018interest rate\u2019 is the amount of interest that is charged as a proportion of the amount of money that you have borrowed.\u202f <\/p>\n\n\n\n

An APR (Annual Percentage Rate) tells you the total cost of borrowing over a year as a percentage of the amount borrowed.\u202f <\/p>\n\n\n\n

If you repay the money you borrowed on your card by the end of your billing period, you can avoid being charged interest.\u202f\u202f <\/p>\n\n\n\n

An advantage of using credit cards is something known as \u2018buyer protection\u2019 \u2013 this means that if you pay for something between \u00a3100 and \u00a330,000 on a credit card, and the company doesn\u2019t deliver, by law (Section 75 of the Consumer Credit Act 1974) your credit card provider is required to give you a full refund, even if the company you bought from has gone out of business or won\u2019t pay refund you itself.\u202f <\/p>\n\n\n\n

However, credit cards may look like easy access money, but you might be putting yourself at risk of borrowing money you find yourself unable to repay, resulting in your level of debt rising. <\/p>\n\n\n\n

If you\u2019re unable to repay, there can be some scary consequences, for example damaging your credit score (you can see our last blog post for more on this topic), incurring additional charges, and accruing a large amount of interest, all of which will make it more difficult to repay the debt. <\/p>\n\n\n\n

Interest payments alone can make it difficult to save and stop you from being able to afford large purchases in the future.  <\/p>\n\n\n\n

It is difficult to clear your debt just by keeping up with the minimum repayments, so make sure you\u2019re putting aside enough money to pay off your debt as much as you can. If you\u2019re struggling with debt contact the Money & Housing Advice Service<\/a> who can put you in contact with Specialist Debt Adviser who can help you to get back on track.<\/p>\n\n\n\n

Also make sure to check out @Blackbullion and follow the link below to read an article on Credit Cards and a handy guide on Paying Off Debt.\u202f <\/p>\n\n\n\n

Credit Cards | Blackbullion<\/a> <\/p>\n\n\n\n

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Mortgages<\/strong><\/p>\n\n\n\n

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Photo by Kostiantyn Li<\/a> on Unsplash<\/a><\/figcaption><\/figure>\n\n\n\n

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The scary M word\u2026Mortgages. <\/p>\n\n\n\n

We all can\u2019t wait for the day we get the keys to our own place! However, making such a big financial commitment can be overwhelming. While it may seem a something for your future self to tackle, it can\u2019t hurt to get ahead and know what you should consider before planning your dream home!\u202f\u202f <\/p>\n\n\n\n

Very few people buy a property upfront. Most people will put down a sum of money and take out something called a \u2018mortgage\u2019 to cover the rest. A mortgage is a type of loan specially made to help you purchase a property, where you borrow money from a bank or building society. The interest rate will either be fixed or variable, or sometimes a combination, and usually lasts for 3-30 years.\u202f\u202f<\/p>\n\n\n\n

The amount you need to borrow will depend on things such as the size of your deposit and the purchase price of the property you want (which has its own long list of considerations!). Generally speaking, the bigger your deposit, the lower the interest rate attached to the mortgage.  <\/p>\n\n\n\n

However, the amount of your mortgage that you can afford depends on your yearly income and other financial commitments you may have. Most lenders will limit the amount you can borrow to just under 5 times your yearly wage.\u202f <\/p>\n\n\n\n

Don\u2019t forget the deposit and mortgage repayments are just some of the expenses that go along with buying a property! You will have to consider additional costs like property tax\/stamp duty, survey fees, land registry and more. <\/p>\n\n\n\n

Worried? Confused? Click the link below and check Blackbullion\u2019s \u2018Mortgages 101\u2019 article to see what questions you need to ask yourself before jumping onto the property ladder!\u202f\u202f <\/p>\n\n\n\n

Mortgages 101 | Blackbullion<\/a> <\/p>\n\n\n\n

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Student Loan<\/strong> <\/p>\n\n\n\n

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Photo by Green Chameleon<\/a> on Unsplash<\/a><\/figcaption><\/figure>\n\n\n\n

Student loan repayments begin the April after you complete your studies (whether you graduate or not), provided you are earning over the current repayment threshold.  If you are earning under the threshold you will not repay until you are earning above the repayment threshold.  Likewise, if your income falls below this threshold, your loan repayments will stop. <\/p>\n\n\n\n

So how does your employment type affect your loan repayments? <\/p>\n\n\n\n

If you are self-employed, the loan repayments will be calculated each year alongside your other taxes when you complete a tax return. <\/p>\n\n\n\n

If you are employed but not self-employed, Student Finance England will take the money directly out of your paycheck each month<\/em>.<\/p>\n\n\n\n

When you begin to repay depends on which Plan you are on. 4 plans exist (Plan 1, Plan 2, Plan 4 and Postgraduate Loan). <\/p>\n\n\n\n

Plan 2 applies for all English and Welsh students who have begun an undergraduate course anywhere in the UK (and EU students who have begun an undergraduate course in England and Wales) from September 2012 onwards, currently Plan 2 repayments only begin after your income is over \u00a3524 a week, over \u00a32274 a month, or over \u00a327295 a year. You will repay 9% of the amount you earn over the threshold per month.  <\/p>\n\n\n\n

Postgraduate Loan Plans apply to all English and Welsh students who took out a Postgraduate Master\u2019s Loan on\/after August 1 2016<\/strong>, all English and Welsh students who took out a Postgraduate Doctoral Loan on\/after August 1 2018<\/strong>, or all EU students who started any postgraduate course on\/after August 1 2016<\/strong>.  Postgraduate Loan Repayments only begin after your income is over \u00a3403 a week, over \u00a31750 a month, or over \u00a321000 a year. You will repay 6% of the amount you earn over the threshold per month. <\/p>\n\n\n\n

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Example Plan 2 Student loan<\/strong>\u200b\u202f <\/p>\n\n\n\n

Here\u2019s an example of repaying student loans on Plan 2: <\/p>\n\n\n\n

Your annual income is \u00a328,800 and you are paid a regular monthly wage. This means that each month\u202fyour income is \u00a32,400 (\u00a328,800 divided by 12). This is over the Plan 2 monthly threshold of \u00a32,214.\u200b\u202f <\/p>\n\n\n\n

Your income is \u00a3186 over the threshold (\u00a32,400 minus \u00a32,214).This means that you will pay back \u00a316 (9% of \u00a3186) each\u202fmonth.\u200b\u202f <\/p>\n\n\n\n

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Example Postgraduate<\/strong>\u200b\u202f <\/p>\n\n\n\n

And here\u2019s an example of Postgraduate Loan Plan repayments:  <\/p>\n\n\n\n

Your annual income is \u00a328,800 and you are paid a regular monthly wage. This means that each month\u202fyour income is \u00a32,400 (\u00a328,800 divided by 12). This is over the Postgraduate Loan monthly threshold of \u00a31,750.\u200b\u202f <\/p>\n\n\n\n

Your income is \u00a3650 over the threshold (\u00a32,400 minus \u00a31,750). You will pay back \u00a339 (6% of \u00a3650) each\u202fmonth.\u200b\u202f <\/p>\n\n\n\n

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Got both?<\/strong>\u200b\u202f <\/p>\n\n\n\n

If you are on both plans: <\/p>\n\n\n\n