The Wine Lady

joyner33

I have just started earning enough money to have to start paying back my student loan. However, I'm only just over the threshold, and with my other financial outgoings things are going to be a little bit tight. I was wondering if it was possible to transfer my loan balance to a 0% interest credit card and swap it around like I would a normal debt, so as to make the final balance a little less and to maybe make the monthly instalments a little more manageable? Are we tied into the contract with the Student Loans Co so that this is not allowed and, if so, are they legally allowed to do that?

stuwilky

Hi Joyner,
Its a good idea, but Im not sure it would save you any money in the short term if you are only a little bit over the threshold. It depends on your student loan amount as well.

eg if you earn £16000 and have a loan of £12000 your repayments will only be £90 per year. But if you were to transfer £12000 to a credit card your monthly repayment will be around £360 (presuming a minimum payment of 3% of the outstanding balance).

Although if you are looking to save in the long term you will save a fair amount in interest so it would be worth doing if you can manage the repayments. The 0% is a good idea though so would it be worth considering stoozing the cash and using the interest you gain to help subsidise your income?

But it would be possible, you can overpay the student loan, but unless you pay it all off you will still have to make the minimum repayments direct from your salary. You might have to play a bit - you can pay it off with a switch card and then transfer the resulting overdraft to an egg card. I dont think the SLC accept credit card payments but I could be wrong!

HTH

sly_dog_jonah

The SLC do accept Credit Card payments, indeed you could earn cashback from paying it off. Your employer would only stop deducting your repayments from your salary after the Inland Revenue had told them to stop making deductions. The Inland Revenue would only tell your employer after the SLC had told them your account was fully settled. Net result: you might be waiting a while before your nominal monthly repayments stop coming out of your pay packet.

With 0% credit card deals (without charges) getting thinner on the ground, it would be a very risky business trying to recycle your debt on 0% deals ad infinitum, particularly if your income only just exceeds the repayment threshold.

newsmonkey

I'd avoid the credit card route for several reasons:

(a) You'd need to find (and be accepted for) a steady stream of 0% credit cards for many years to come (and as sly_dog_jonah suggests, there's no proof such things will exist for that long).

(b) It could potentially balls up your credit rating, making it difficult to get things like mortgages/other loans.

(c) It involves a fair bit of discipline; fail to shift the debt in time and the interest charged will outweigh all the benefits of putting it on a 0% card.

(d) You might fall into the "minimum repayment" trap and end up with a debt that'll take even longer to shift.

(e) No job = no student loan repayments. Shift your student debt to a credit card and if you become unemployed you'll still be expected to pay.

And - personal opinion - I genuinely believe that the student loan is one of the "healthier" ways of borrowing money, not only thanks to the interest rate pegged against inflation, but also because the repayments are proportional to salary, come straight out of your pay without you having to worry about them, and also because if you reach 65 and have debt remaining, it's annulled. Short-term credit card benefits might sound appealing, but the long-term consequences could prove dodgy.

sly_dog_jonah

One final point, your SLC account is never shown on your Credit History unless you have defaulted somehow (gone abroad without sorting out payments, etc). It's invisible debt that credit providers won't be aware of unless you are actually asked to declare it on an application form.

Jaybird_2

Hi Guys.
Thank you for your responses. However, I should clarify that I caught the last of the fee paying grants so only (!) owe about £4500. The monthly repayments are not fixed to my income but as a percentage of the total amount owed and will equal about £122.00/month outlay. I'm earning about 22 grand but have had other debts which I've just about finished paying but which means i'm not in a strong postion financially. In fact, i've just done Martin's financial budget planner and i only hit the green by £79.43!! I have no credit rating as I've never had a credit card and have never taken out a bank loan. My overdraft is the only credit i've used. Does this change the advice or do you think it still stands?

The Wine Lady

Thank you

ashcarrot

"The SLC do accept Credit Card payments, indeed you could earn cashback from paying it off."

Indeed I payed mine off to my credit card and got an instant 0.5% cashback from my 11-12k loan Which was somehting like £80 but its like £80 less off the debt. They dont unfortunatly take AMEX (did try) ...

Clareo

ashcarrot wrote:

"The SLC do accept Credit Card payments, indeed you could earn cashback from paying it off."

Indeed I payed mine off to my credit card and got an instant 0.5% cashback from my 11-12k loan Which was somehting like £80 but its like £80 less off the debt. They dont unfortunatly take AMEX (did try) ...

This subject always sees the forum split into two groups, the yes pay it early or the no way never pay it off! I'm in the no way group by the way.

As for the Wine Lady, if I was in your position I wouldn't pay it off. Without much of a credit history you may not be able to guarentee getting that sort of limit and then if you have to try a couple of cards before you get the required £4500 all the unnecessary searches will go against you when you try to get the next card.

I think to try and shuffle debt round the 0% cards you need to have a strong credit position and be sure that you're going to pretty much be accepted for and receive the required credit limit. If I was you I would be worried I would reach a point where I could shuffle no further and be faced with huge interest payments or have to take out a loan.

However I do wish you luck whatever you decide to do

Katgoddess

If I was you, I would leave the student loan as it is for all the reasons suggested above.

Make overpayments if you like, or do some stoozing.

The interest rate for student loans at the moment is 2.6%. Putting your extra cash in an ISA account like the Yorkshire Building society e saver ISA will earn you 5.2%.

That way you can save any extra money and use it to pay off the loan when you've saved the £4500. If you lose your job or need the cash for something important, you've got the money spare and haven't lost anything.

I hope that made sense!

zcaprd7

Its not really feasible - your minimum payments* will be higher each month than you current student loan.

Also, if you lose your job the student loans can be deferred, I don't think you'll find many credit card providers willing to offer that.

In any case the interest payments are so low as too make the savings hardly worth doing.

If you insist on paying it off early, stooze some credit card cash and each month (or so) pay off an amount equal to the interest gained from your stoozing (preferably using a cashback card, different from the one you use for stoozing).


*It is possible to get around this by borrowing more than you need (you'll need to be able to SBT it into your bank, not pay it off with the card as that will be a purchase) and pay the minimum payments out of that.

Clareo

zcaprd7 wrote:

Its not really feasible - your minimum payments* will be higher each month than you current student loan.

I agree with not paying it off but in this case the minimum payments for her loan could theoretically be more than the card as if you read the post you'd see that the Wine Lady has the old loan so with her monthly payments being £122 and borrowing £4500 on a card that wanted a 2% monthly payment she'd be looking at a payment of £90 instead of £122.

99% of occasions it's impossible for the loan repyament to be less that the card minimum payment but this time it's possible!