“there are credit cards specifically designed for people with no credit history or who have struggled with managing their borrowing in the past...”
Alternatives to graduate loans
As we mentioned, an unsecured personal loan works in much the same way as a graduate loan and could therefore be an option. You will find there’s a wider market to choose from and you may also be able to borrow more than you would through a graduate loan. However, because this type of loan is not specifically designed for graduates, you may find the conditions are stricter. For example, a limited or non-existent credit history might stand against you, as could a low income.
Rather than a loan, you may decide that an overdraft will provide you with the cash boost you’re looking for after you leave university or college. Some banks offer graduates a 0% overdraft, which is likely to be one of the cheapest ways of borrowing you’ll find as you won’t be charged interest if your account goes overdrawn. But, be aware that your overdraft will have a set limit and if you exceed this you could be hit with extra charges – some lenders even charge you for every day that you’re over your agreed overdraft limit. These fees can work out more expensive than the interest charged on a loan so it’s important to avoid them. You should also keep in mind that the 0% deal won’t last forever, so you should aim to be out of your overdraft by the time the deal ends or you’ll have to start paying interest.
A further borrowing option is a credit card. Again, your credit history will play a larger part in lenders determining whether or not to approve your application than it would for a graduate loan, so if you have a very limited history of borrowing this might not be the best option. However, there are credit cards specifically designed for people with no credit history or who have struggled with managing their borrowing in the past, and these might be a more suitable option for you.
If you plan to borrow to pay for a one-off purchase like a car or further qualifications, a loan might be your preferred option as the amount you’ll pay back each month and the interest you’re charged tends to be cheaper than on a credit card. And because you pay back a fixed amount each month, your budgeting will be straightforward. However, if you want to borrow to tide you over with your day-to-day expenses as you settle into your new job, a credit card may be a better option as it lets you be flexible with how much you borrow.
Whatever form of credit you’re considering, it’s vital that you keep up with your repayments. If you fall behind, your credit history will be at risk and this could make it extremely difficult for you to borrow again in the future. You may also be hit with penalty fees that make it harder for you to afford your repayments.