“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.
The one borrowing option that’s unlikely to be suitable if you’re a graduate is the secured loan. This is because, unlike with a personal loan or credit card, this type of loan is secured to your property. If you’ve only just left university, it’s unlikely that you will already be on the property ladder.
However, if you are a homeowner, a secured loan has the benefit of letting you borrow more than you could with a credit card, overdraft or personal loan. And your credit history may play a less important role in the application process, as the lender has your property as security. You must be aware that if you take out a secured loan and then fall behind on the repayments, your home could be at risk.
“Use Ocean QuickCheck to find out whether you’re likely to be accepted...”
Loans with us
Ocean Finance offers two borrowing options if you’re a graduate: personal loans and a credit card.
Our personal loan lets you borrow between £100 and £5,000, and the length of the term and the interest you’re charged will depend on your own circumstances. You will need to be employed to be eligible and we may ask to see proof of your income going back over a few months.
Alternatively, our credit card lets you borrow up to £1,500 (34.9% APR representative variable). If you’re aged over 18, on the Electoral Roll and have some form of credit history, you may be eligible. Use Ocean QuickCheck to find out whether you’re likely to be accepted.