Do Student loans Affect Mortgage Opportunities?

- by Erin Redfern

Full Guide to Managing Family Finances – Chapter 8

Should I take out a student loan? Will it affect my future mortgage opportunities? These questions and others may be buzzing around your head as you apply for your student loan. Be informed and be prepared. Read this short guide from Cashfloat to learn more about the long term effects of student loans.

Learn how to manage your family finances with Cashfloat

Getting help with tuition fees and living costs

UK students can get a Tuition Fee Loan from the Student Loan Company. This can cover up to £9,250 a year in university tuition fees. The capital is transferred straight to the university, the loan will attract interest. The rate of interest varies depending on your status and earnings (RPI, or plus 3% at the time of writing), and it is repayable as soon as a minimum income threshold is met, with repayments met through the tax system. 

In full-time education, living costs still need to be met. A Maintenance Loan is paid to full-time students at the beginning of a term, and is means-tested. Student Finance England supports the Student Loan Company, and they provide more information on the maintenance loan values available here. These loans should not be confused with the old ‘maintenance grants’, which were discontinued several years ago.

Will a student loan affect my credit rating?

Details about student loans are not on credit files at the major credit reference agencies. However, if you are applying to borrow money on a personal loan or take out a credit card , you may need to give details about any outstanding amounts. When applying for a mortgage, there are two schools of thought about whether or not having student debt impacts your chances of a successful application. Graduates are sometimes the higher earners and, therefore, more likely to get approval for a mortgage application. However, if the student debt is high, it can affect the affordability factor. Lenders will need to be sure that you can afford mortgage repayments and all your other monthly outgoings.

Quote about student debt - Cashfloat Quote about student debt - Cashfloat

How is a student loan paid back?

Quite unlike loans such as mortgages, car loans or payday loans from direct lenders, the student loan is repaid directly from earnings. You only begin paying back after reaching a certain income level.

A student loan is not on a credit file, so it won’t be a reason for a debt collector appearing at your door. Before being discouraged by the large figures quoted in the media about how much you can owe, consider the earning potential of your degree by subject, and the probability of you reaching that potential. If a university degree is your dream, and what will make you happy, then incurring student debt may be a necessary part of your trajectory.

You can overpay on your student loan. However, you may want to consider whether this is worth it when interest rates are low. Low earners may not need to repay anything at all. On the other hand, if your student loan is making a difference to getting a mortgage, overpaying may be the best option. Generally, however, student debt is ‘good’ debt (possibly the only one) because the interest on it is low. 

Watch this video by Martin Lewis: Student Loans Decoded


Conclusion

At Cashfloat, we try to help you avoid taking out fast loans online. By taking out a student loan to cover your costs of studying and living, you are helping yourself and forging an exciting path ahead.


Cashfloat - Helping you with your family finances, one step at a time. Cashfloat - Helping you with your family finances, one step at a time.
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About The Author
Erin Redfern
Erin, a native Londoner, combines her love for the city with her passion for writing. With a first-class degree in Mathematics, Elizabeth chose to pursue a career aligned with her real passion—writing.
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* Cashfloat terms and conditions apply. Applicants must be 18 or over. All loans are subject to affordability, applicant verification and traditional credit checks via various national databases by Cashfloat responsible lending policy. In most cases, loan decisions may take up to 30 minutes during office working hours. If your bank does not support Faster Payments, funds will be sent to your account the same day as approval so long as you’re approved by 16:30.


*Money will be funded to your bank within 1 hour of approval - Mon-Fri during working hours.


Representative example: Borrow £700 for 6 months. 1st monthly repayment of £168.45, 4 monthly repayments of £224.60, last monthly repayment of £112.20. Total repayment £1,179.05. Interest rate p.a. (fixed) 185.39%. Representative APR 611.74% Our APR includes all applicable fees. Daily interest is capped at 0.798%.


Warning: Late repayment can cause you serious money problems. For help, go to moneyhelper.org.uk