Is a Career development Loan a Good Idea?

A career development loan is available to anyone that wants to borrow money to do a course that will improve their career prospects. They can be used for all sorts of different courses and therefore are a flexible option for many people who want to do some more study. It is worth understanding more about them and how they differ from a student loan and other types of borrowing.

What is a career development loan?
A career development loan is only made available to those people who want to study a course and need help with paying the fees. They are specifically for people studying to improve their career and so the course you are taking ill need to be specified in your loan application. You will get money that will cover the course fees and living expenses. During the duration of the course you will not be expected to make any repayments, although you will have interest added to the loan. As soon as the course ends you will need to start repaying the loan.

How it differs from a student loan
There are similarities with a student loan in that you will be able to borrow the money to pay for a course and do not have to repay it until after the course ends. However, with a student loan you only have to repay the loan if you are earning enough money. This does not happen with a career development loan where you are expected to start repaying it regardless of whether you have a job. A student loan is also written off after thirty years regardless of whether you have repaid the full balance. A career development loan has a specific repayment schedule and you are expected to make all of the repayments. A student loan is repaid through your tax code and does not impact your credit record but a career development loan has to repaid by you, usually through direct debit in the way that you would expect to repay a standard loan and does affect your credit record. The interest rate on a student loan tends to be lower than that on a career development loan. A student loan is means tested though, so you can only borrow the full amount if your household is thought to not be earning too much money, however, a career development loan is not means tested.

From this you can see that it would probably be best to go for a student loan if you are eligible for one as it will be cheaper and has better terms meaning that there is a chance that you will not have to fully repay it. However, you can only borrow for four years with a student loan so if you have had one before for a degree then you will not be able to get one again unless it is for a master’s degree. You will also find that student loans are only available for specific courses so if you are not doing a degree course then you may not be able to get one. If you are older and have had a grant in the past the same will apply, if you have had 4 years of grant money then you will not be able to get a student loan.

How it differs from other loans
A career development loan is therefore fairly similar to other loans and it can be just as expensive as well. The main way in which it differs is that you do not have to start repaying it until you complete your course. This could be crucial as you may be studying full-time and not able to be working and getting an income at the same time. In this case you would need to be able to find an alternative way to cover those repayments.

If you feel that the career development is too expensive and do not have an alternative as you cannot work while you are studying there is a possible way out. Once you have finished studying you may be able to get a conventional loan and use it to pay off the career development loan so that you have a cheaper loan to repay. You would obviously need to do lots of calculations to see if this would be worthwhile and hope that your credit rating was high enough to allow you to get a loan at a good rate. It may not be a solution that you should rely on but it could be an option that you might want to take. You will also need to make sure that you take into account any early redemption fees on the career development loan, to make sure that it really is cheaper to pay it off early as these costs may make it too expensive an option.