Business Personal Finance

Monday 25 June 2018

'I want to work abroad this summer and need a loan to cover costs. This is my first student loan - what should I look out for?'

When taking out a loan, there is a lot to consider Stock Image
When taking out a loan, there is a lot to consider Stock Image

Aine O'Carroll

All your consumer questions answered

Question

I am planning to go on a working holiday this summer and will be taking out a loan to cover the cost of my trip. As I have never taken out a loan before, what should I look out for?

Sean, Galway City

Answer

When taking out a loan, there is a lot to consider: how much you need to borrow, how much you can afford to repay and how quickly you can pay it back. If borrowing to fund your summer away, aim to have the loan paid back as quickly as possible, and certainly before next summer rolls around. Before you borrow, work out how much you can realistically afford to pay back each month. Ask yourself how much you need to borrow and don't be tempted to borrow more than you need or can afford to repay.

Before taking out a loan, check if the repayments start immediately or if they can be deferred for three months - as is the case with some student loans. Other student loans charge interest only for an agreed period of time, followed by interest and capital repayments. This can make your repayments lower in the first few months and could suit you while you are away travelling.

Credit always comes at a cost as you pay interest on what you borrow. The CCPC has a student loan comparison on its website ccpc.ie which currently shows interest on a student loan of €1,000 over one year ranges from 1pc to 9.7pc.

If your loan is for more than €500, it will be recorded on the Central Credit Register - which is run by the Central Bank of Ireland. Information, such as outstanding loan balances and any missed repayments is held on the Register for a period of five years from when it is first submitted. So if you miss payments on your loan, this will damage your credit record and impact on your ability to get a loan or mortgage in the future.

Aine O'Carroll is director of communications and market insights with the CCPC (ccpc.ie).

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