Career Development Loan vs Bank Loan?

linzibean

I am studying an MSc next year, and am considering my finance options. I am currently working full time to save up for my wedding and put a bit aside for next year, though I will still need a substantial amount to get by next year. As will be a little older than most of my fellow students, I won't need the cash for so much drinking and partying but I will needmoney for our second car (we will live rouugl halfway between where OH works and I go to uni), and we will be relocating to the South of England where it is more pricey!

I can take a maximum of £8k from the CDL, but up to £15k from my own bank (not that I want that much!!) for a slightly better rate - however, I would have to pay interest while I study. CDL works out at 12.9%, whereas bank would be c.8%

Which do you think would be the better option?

studentkathryn

Hey, there's a really good article on CDLs on here somewhere which is really worth reading before making a decision. I think if you or the hubby can meet the repayments of the bank loan, take that because CDLs aren't that great.
I also just wanted to say that whilst you're working, consider taking out one or two interest-free credit cards (the six month ones) and if you run into problems, you always have them. You can't get them when you're a student.

Oldernotwiser

Can you afford the repayments whilst you're studying? This seems to be the point that will determine your choice.

linzibean

Well the way we're thinking of doing it is, I would pay the rent for 12 months straight off with the loan, and OH would pay all other bills (approx £450 p/month) as well as loan repayments while i'm studying. I am hoping to work also, however there will be a lot of lab work and placements with my course which may make regular work difficult. Then once I graduate and (fingers crossed!!) get a new job, we would revert to paying 1/2 and 1/2 of evrything from our wages as we do now

Oldernotwiser

If you can afford the loan repayments whilst you're studying I can't see any advantage for you in the CDL. Having the interest paid and no repayments whilst on the course are the only benefits to the scheme. If you don't need these benefits, there doesn't seem any point in taking out a more expensive loan.

jbbonce

Why not take out the cdl, milk it for a year then pay it off with a better rate loan when you have to start paying interest on it. You are not tied in to keeping it at the same rate.

Oldernotwiser

jbbonce wrote:

Why not take out the cdl, milk it for a year then pay it off with a better rate loan when you have to start paying interest on it. You are not tied in to keeping it at the same rate.

I believe that you're not able to pay off a CDL loan like this; it has to be paid off over at least 12 months.

berec1

I took out a CDL in October 05, for which repayments begin on in June 07 and last 5 years. I made it clear when enquiring to them that I might want to pay the whole thing off in one go before the interest stopped being paid by the Government, and that I couldn't take out the CDL unless this were the case.

The bank (Barclays) told me that

• I could pay the loan off at any time - so long as I paid it in full
• interest would be calculated up to the date I wished to pay it off in full (so as long as the Government were still paying the interest at that point I'd therefore incur no interest)
• There would be no penalty charge of any kind if I paid it off in full before the CDL interest of 12.9% hit
• The woman at Barclays actually volunteered the advice to me that if I cleared the loan in full by June 07 then I would owe no interest or charges at all beyond what I originally borrowed.

That's what led me to take out the CDL - I owe the same this June as I borrowed back in October, and will take out a second lower rate loan in May to ensure the CDL is paid off before the 12.9% rate hits me.

However it may be as Oldernotwiser says that the situation has changed for new CDL-ers and now you can't pay it off in full for at least 12 months.

(at least for me I have the correspondence and notes and if Barclays tried to do me over they'd be in for a shock)

But if you're genuinely considering a CDL the best thing to do is to speak to the individual bank that you might take the CDL from and clarify with them their position on clearing the loan in full before the Government finish paying the interest - whether you can do that and if so whether you incur any penalties. Then you know the situation for yourself and can make the decision which loan to go for.

Oldernotwiser

Sorry about that; I was passing on unchecked information from a colleague(who should know better). I've since checked it out with Barclays and they confirm what you were told.
Apologies again.

davelewis

I always thought CDL's were only available for vocational job related courses (such as Legal practice course?)

I'd double check they will let you have one for an MSC.

jbbonce

davelewis wrote:

I always thought CDL's were only available for vocational job related courses (such as Legal practice course?)

I'd double check they will let you have one for an MSC.

No, they are available for masters courses