So that’s it. University finished, no more exams, some magical memories, but what are you now going to do with that degree in Ancient Greek History? The first thing on most recent graduate’s minds is finding a job and quick. Being poor and scrimping by in the ‘value’ section of Tesco only has its appeal for a few years. Once graduated, the vast majority are keen to find gainful employment and start to think about clearing the mountain of debt that fees, accommodation, food (and let’s not forget the drinking) have created over the past 3-4 years.
The big question is ‘how do I start to repay the debts that have stacked up?’ With a little bit of planning and a lot of self-discipline, this process can be a lot easier than some may make out. Start by making a list of all of your outstanding debts. The typical student will have at least one interest-free overdraft facility, a student-loan and maybe loans from family and the odd credit card thrown in for good measure.
Once you have a complete list of your creditors and the amounts owed to each body, you need to identify the interest rates that you are paying on these debts and the speed with which the creditors will want to be repaid. Believe it or not, but the Bank of Mum and Dad is actually a very reasonable credit facility. Interest rates tend to be nominal and flexible payment arrangements are common!
Repaying debts should therefore start by paying those that charge the highest rate of interest. Typically, this will be a credit card or store card who typically charge between 10% and 40% APR.
With the recent furore over government policy for student debts, it is easy to think that as soon as you have finished University that a Student Loan becomes immediately repayable. This is not the case and any recent graduate should get in touch with their Student Loan provider to discuss their plans, earnings and intention for repaying these loans. Remember that these loans are only repayable when you reach a certain earnings threshold and often attract a more generous rate of interest in comparison to overdrafts, credit cards and store cards.
In some cases, students do get into difficulties early on in their graduate life with the high street bank that had previously been keen to increase their overdraft limit, but now appear to want it all back. It is important to let all of your creditors know what your plans are for post-university life, as many financial organisations (particularly in the current economic climate) are keen to retrieve their funds, and don’t like long periods going by without hearing from their debtors.
Indeed the author of this blog post had a rather nasty experience with a well-known bank as he did not inform them that he had returned to live with his parents following finishing university. This resulted in the bank cancelling his overdraft facility within 2 months of his leaving date and when finally some monies were paid into the account, yours truly was whisked into the Manager’s office with great haste and the entire £1,500 overdraft was called in with immediate effect!
Cases like this are more widespread than you think, and can be easily avoided. A written letter to the bank informing them of your plans can stop this type of practice and it is also likely to lead to more options for graduate banking being offered.
When that first pay check does come in, do spend it wisely! As you will have a picture of your overall finances and details of the rate of interest you are paying you can compare the advantages of speeding up your debt repayments versus a spending-spree on gadgets, designer clothing and the nicer things in life. In some cases it will be more advantageous to repay your debts more quickly rather than entering into savings plans and you should seek financial planning guidance if you have more than £100 per month available at the end of each month.
Leaving the student world and entering the world of work can be a daunting experience, but getting into the habit of good financial planning at the start, can help you to avoid difficulties later on life. Three simple rules should help guide this planning and you can’t go far wrong!
- Always understand who you owe money to and the total you owe to each.
- Have a clear plan for the repayment schedule (i.e. how long you intend to borrow for and the amount that you need to regularly repay).
- Try to re-structure your repayments so that you pay the creditors with the highest rates of interest first.
If you do get into further financial difficulties and find your debt is compunding, you can contact Lewis Alexander on 0800 018 6868. We are debt management company with a proven track record and can offer advice, support and guidance in managing creditors and reducing personal debt. We start by understanding the overall picture of your financial circumstances and then work with you to find a plan that suits you individually and then are able to agree this with your creditors.
As you are at the start of your working life when leaving University, applying the principles of this article will help the vast majority of graduates, but if you are still struggling with your personal finances and as long as you have a regular source of income, together with a will and determination to improve your personal debt circumstances then we can help!
Our professional debt management advisors are ready to take your call, so contact Lewis Alexander on 0800 018 6868, your call is free!
