Career Development Loan - Barclays - Early payment penalty?

anewman

Does anyone know the max this is likely to cost for £8k? As I understand it, it is supposed to be compensation for interest that Barclays lose out on in the deal as you had a contract to repay it over an extended period. Just want to factor this cost into my consideration of whether I go ahead with everything or not

Eoin_McLove

If you do take out a CDL, then you should take out another, much cheaper loan before you're due to start CDL repayments, and pay the CDL off in one go. There is no early repayment penalty if you pay the loan off in full before your repayments start. In my case, I am due to start repayments (£181 per month for five years!) this November. I am going to apply to borrow £8,000 from Northern Rock in September, by which time I will have started work - this loan will cost me £82 per month over ten years.

Martin has an article on CDLs, where he advises everyone who is eligible for them to borrow the maximum £8,000, whack it in a high-interest account, and pay the loan off before the repayments start, so it's clear that you won't be penalised if you pay the loan off with another cheaper loan prior to the commencement of repayments.

anewman

But as I understand it Barclays make a charge if you pay them straight back before they start charging interest as they now miss out on charging you interest (in the form of an "early payment penalty"). I am just wondering how much that charge is (I am hoping it's nominal [under £100] rather than being representative of the interest charges they miss out on) so then I can get a cheaper loan. If there's no charge at all then that's better (and I guess they get their money out of it anyway with the gobvernment paying the interest.

Have already read Martin's article and applied for the full £8k and looked into ISA's Am surprised they provisionally accepted me for the £8k as am only going part time - but not complaining.

Eoin_McLove

You may be right about a charge for repaying in full before the repayments begin, although from what I read when I took out the loan, it seemed that you would only be penalised if you made over-payments or a full repayment once the monthly repayments had begun. I'll have to check it out, because I'm going to be paying mine off in full some time within the next couple of months. As you say, it's not as if Barclays haven't gained anything, since the government has been paying them interest over the year; that must amount to well over £250, I would have thought.

davelewis

There is definately no early repayment penalty with barclays. I have checked, double checked, and checked again - with different members of staff.

I have just applied for one. I am really fortunate that i have the funds i need for my LPC - but am taking a CDL to keep hold of my cash until i start working!!!

As the government pays the interest while you are studying - Barclays do not loose out on anything.

HTH

anewman

That's one less thing to worry about then

davelewis wrote:

I have just applied for one. I am really fortunate that i have the funds i need for my LPC - but am taking a CDL to keep hold of my cash until i start working!!!

Sounds a good idea. Particularly as you can instantly have 3k in year one making you at least 5% in the right account

richie_s

I have the CDL contract in front of me now and this section about early repayment is troubling me. This is for a loan of £8000 for a 2 year course with 36 month repayment term. When I applied for the loan Barclays told me that there was no payment for any early repayment even once the interest has started, this is obviously incorrect. Does any one know what is meant by the 'loan term' in the pargraph bellow, does the 'loan term' include the intrest free period or is it just the 36 month repayment term? My plan after reading this forum is to play it safe and pay the loan of before the repayments start but I just want to be entirely sure that I will not get charged.

"YOUR RIGHT TO REPAY THE LOAN EARLY"
"you have the right to bring this agreement to an end at any time by making a single payment. The amount that you would have to pay if for example you wish to settle when a quarter of the loan term has passed would be £8000; if half the loan term has passed would be £6,865.67, and if three quarters of the loan term has passed would be £3,706.11. In calculating the amounts shown, no account has been taken for any variation which may occur under the agreement. These amounts are accordingly only illustrative"