Students, know your financial limits
12/03/2008
These days, when you go to university you usually end up with more than a degree – chances are you’ll have a pretty major debt to go with it. Your first year alone is likely to leave you £6,000* in the red and this is likely to grow to a staggering £17,500 by the time you leave.
It is not surprising that, according to recent research**, some 56 per cent of UK students have trouble managing their finances and a fifth are finding it a real struggle. Clearly, most students still have a bit to learn when it comes to money management.
You can start by checking out these tips for living on a tight budget. They won’t guarantee that you leave university debt-free but they will help you make your money work a bit harder.
Do your homework
You may have more exciting things on your mind when you start college but it really pays to do your financial homework. Always compare deals before choosing a bank account, loan or credit card – and don’t be too swayed by introductory gifts and short-term offers when what you really need is free banking, a flexible, low-cost overdraft facility and a competitive interest rate. With LowerMyBills.co.uk you can compare the best deals on loans, credit cards, insurance and other essentials.
If it’s a loan you’re after, your first stop should be the Student Loans Company – the interest rate is low and you needn’t pay anything back until you’re earning.
Set a budget
Don’t be tempted to blow most of your money as soon as you get it. Work out how much you need to live on, allowing a bit extra for unexpected expenses, and stick to it.
It’s also crucial to pay what you owe on time. A part-time job may help you make ends meet if you are struggling.
See the shape of your financial future
How you manage student debts will shape your financial future, because your repayment history and details of the amount of credit you have taken on – such as bank loans or credit cards – will be registered on your credit report.
This is the personal history of your credit commitments, with the exception of loans taken out with the Student Loans Company, which are not currently included. It also contains other information, such as any court judgments against you. Lenders use it, along with the information on your application form, when they decide whether to make you an offer and what interest to charge.
Landlords and employers may also ask to look at your credit report. So it makes sense to get to know it and make certain it’s up to date. You can see your Experian credit report for free with a 30-day trial of CreditExpert, the UK’s leading online credit monitoring and ID fraud protection service.
Get on the electoral roll
Lenders use the electoral roll to check that you are who you say you are and live where you say you do. If your name is not on the electoral roll or you are registered to vote at a different address to the one you give in an application for credit, they may ask for further proof of identity or even refuse your application.
Watch your credit history grow
Make certain that you’re on top of your finances by checking your credit report regularly. For example, look for a record that you are paying bills and loan instalments on time. Any inaccuracies can affect your ability to get cards, loans and – eventually – a mortgage, so it’s important to make sure that all the information is right.
If you find anything you don’t understand or think is wrong, contact a credit reference agency such as Experian and they’ll help you set the record straight.
Protect your data
Identity fraud is one of the UK’s fastest-growing crimes. It takes place when criminals acquire enough of your personal information to borrow money in your name, draw benefits or even use your ID in fake marriages.
It can take hundreds of hours to put the situation right, so take sensible precautions. As you are likely to be moving home quite often, forward mail and notify your bank and other lenders when you move, shred personal documents before binning them, check statements carefully and tell the police if important papers are stolen. For more advice, visit www.stop-idfraud.co.uk.
Don’t wait until you’re in trouble
If you are struggling with repayments, your income drops or your circumstances change, always let your lenders know. They will help you to find a way forward. Increasing numbers of people are going bankrupt or taking out an Individual Voluntary Arrangement to escape debt – but it should be a last resort. Both options stay on your credit report for many years and you could be refused credit for some time or charged very high interest as a result.
Speak to a Student Union adviser to make sure you are getting all the financial support you are entitled to. Other organisations offering free guidance include Citizens Advice, National Debtline on 0808 808 4000 and the Consumer Credit Counselling Service on 0800 328 1813.
Look to the future
It’s tempting to live for today and worry about your debts tomorrow – but if you let things slip now you could be storing up problems for the future. If you put in bit of effort to keep your finances on track you should have no problem getting the credit you need – such as a mortgage, car loan or credit card – after graduation.
* Push.co.uk, August 2007
** UNITE student report, January 2007
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