Will i make money banking my loan?

Chris369

Basicaly, im living at home and dont actually need my student loan but ive taken it anyway and ive been putting it into my Abbey ISA. Question is, will i actually make any money? When i took out the loan i was under the impression that it was interest free but then i found it wasnt. Is the interest rate on my ISA higher than what i will be paying on the loan?

Cheers.

R00STER00

Student loan interest is charged at the rate of inflation (it will probably vary around 2-3%). Assuming your savings account beats this then yes, it is a way of making money. Sounds like putting it in an ISA is a good option.

Remember you get a tax free allowance every year so might be able to beat the rate you get from your ISA in another account. However, you will lose the tax free advantage when you start earning.

jitsuguy

At the moment ISAs are tax free and a re good way of investing the money, but do make sure you've got the best ISA out there - some pay more than others. But also take note that if you get an R85 form from either the bank or Inland Revenue this will entitle you not to pay tax on an interest, so it might be better for you to invest the money in an high savings account with another bank/building society. In other words shop around for the best deal.

I currently receive a PhD grant of £3500 for a three month period but I have a bank account that has an overdraft and an interest rate of 0.1% - Not making the money work for me, so will be transferring it and should make about £60-£100 a year on tax free interest! About time too!

wirm

So what are the good ISAs?

Chris369

I didnt shop around when setting up my ISA, i just went with Abbey as thats who my previous savings account was with. Are Abbey any good?

jitsuguy

Go to the 'money supermarket:'
http://www.moneysupermarket.com/

Bare in mind that this is a commerical site and may not include all ISAs, but does have the Abbey one which is a fair way down on the list. The best seems to be with First Direct at 5.50%.

jimclark1967

jitsuguy wrote:

Go to the 'money supermarket:'
http://www.moneysupermarket.com/

Bare in mind that this is a commerical site and may not include all ISAs, but does have the Abbey one which is a fair way down on the list. The best seems to be with First Direct at 5.50%.

Just note that the First Direct rate drops to 4.00% on 16 February so no point opening it at this stage. Better to go for A&L at 5.2% or Halifax at 5%

JC

mossie70

Check out http://www.moneyfacts.co.uk

This website has comparison rates on a number of products.

Hope that helps ;-)