Saturday 24 March 2018

borrowing for college could cost €2,000 more at a bank

Parents could pay €2,000 more to borrow the money to put their child through the first year of college if they don't shop around.

About six-out-of-10 parents get into debt to cover college costs, according to the Irish League of Credit Unions (ILCU). So if you're considering borrowing, you're not alone. Bank loans can be expensive, however, so choose wisely.

Let's say your child starts college this September and you want to borrow €11,000 to put them through their first year of college.

The cheapest bank to borrow that money from is Bank of Ireland. BoI charges 7.5pc interest on a personal loan of €11,000 - which will cost you €2,148 in interest over five years. Next in line is AIB, which charges 8.73pc interest on a parent student finance loan.

At that rate, it will cost you €2,509 over five years to borrow €11,000.

The most expensive banks to borrow €11,000 from are KBC Bank, Permanent TSB and Ulster Bank. KBC charges 12.7pc interest on a loan of €11,000 (unless you qualify for its discounted rate of 10.5pc). Borrowing €11,000 over five years at an interest rate of 12.7pc will cost you €3,687 in interest - almost €1,540 more than BoI.

Permanent TSB charges 12.5pc interest on a standard personal loan of €11,000 - which will cost you €3,614 over five years. Permanent TSB also offers cash secured loans with an interest rate of 7.1pc - but you can only get this rate if your entire loan is secured on savings which you hold. Ulster Bank charges 12.3pc on its fixed rate parental student loan - this will cost you €3,569 on borrowings of €11,000.

Don't overlook your local credit union - standard personal loans from credit unions can be expensive, but cheaper loans might be available.

The average interest rate charged by credit unions on educational loans for example is 6.55pc, according to the ILCU, while the typical interest rate charged on student loans is 5.99pc. It will cost you €1,871 to borrow €11,000 over five years if you're charged 6.55pc interest, or €1,708 if you're charged 5.99pc - that's as much as €2,000 cheaper than a bank loan.

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