If you want a loan to help you with studying then you may wonder which to take. A student loan and a career development loan are both designed to help cover the costs of courses.
Firstly there are restrictions on who can get the loans and so you will need to find out whether you will qualify to get one before you consider applying. A student loan is for anyone doing an undergraduate degree or postgraduate degree that has not received funding for a course in the past (such as a previous grant or student loan) and it covers up to four years of study. A career development loan is for any course that will improve your career prospects and you will have to apply and see whether the course that you are planning on doing fits in with their requirements.
The way that the interest is calculated on both loans is the same, with interest not having to be paid until the course is ended. The repayments are very different though. With a student loan you will not have to make any repayments until you are earning enough money. There are certain thresholds you will pass for salary where you will have to increase how much you are paying. With a career development loan you will be expected to start making the repayments as soon as the course finishes regardless of whether you are earning anything or not.
The interest rate on a career development loan is set differently to a student loan. The student loan is an inflation linked amount but a career development loan is set more based on the Bank of England base rate and is therefore likely to be a lot higher.
As a student loan is only paid when you are earning and is linked to salary then paying it off early is not normally wise. After thirty years any remaining money owed gets written off and therefore does not need to be paid back. However, all of the money borrowed for a career development loan has to be paid off and therefore you will have no choice but to pay it back. Paying it back early could save a lot of money as you will save the interest that you would have paid had you not paid it back early. There may be an early redemption fee, but it is worth checking as not all loans will have this.
So if you are making a choice between the two types of loan then you firstly will need to check which will be the available for you to be able to get. If you can choose between the two then you need to consider the cost of the loans and the way that they are repaid. It is likely that the student loan would be a better and cheaper option than the career development loan.
If you only have the option of a career development loan then you might find that it will actually be expensive compared to other types of loan. Personal loans, for example, can be pretty competitive and so it may be worth seeing whether you can get one of these instead. It may be difficult, especially if you will be studying full time as there will be no guaranteed income to repay it when the course has finished. However, if you are in a long term relationship, you may be able to use your partner as a guarantor or even get them to take out the loan on your behalf.
It may be tempting to save up for a course, rather than using a loan. This will mean that you will be able to avoid debt while you are studying and therefore not have the worry of repayments. However, this will delay you being able to start your course until you have saved up the money and it could be a significant amount to have to save. Obviously how long it takes will depend on your ability to save, which will be determined by your income and expenditure. It can be well worth considering doing this if you are considering a career development loan as they can be expensive. However, with a student loan it is probably better to take it out and repay it through your tax code as expected as you will be likely to repay less than the full amount.
