Everyone manages their finances differently and some will have more debt than others. The best way to avoid debt is to make sure your expenditure doesn’t exceed your income. Only buy things you really need, budget your money and to make the most of the numerous financial products available to you. When it comes to borrowing money there are lower and higher risk options.
Low risk credit
An Interest-free student overdraft is one of the most common ways for students to fund themselves whilst at university. Students who work tend not to rely on them as much. Please read the terms and conditions when applying for an account. You should only have one student account at a time. You can compare the best student accounts here.
Credit cards can offer you some additional flexibility, especially if you have to find money for an accommodation deposit and you have a cash flow problem. Credit cards work best when you pay them off on a regular basis. For example, you need a deposit for your accommodation but your wages are not due for another three weeks. Credit cards become high risk when you can no longer afford the repayments. We have student-friendly budget sheets to help you manage your finances.
High risk credit
Payday loans such as Wonga, Payday UK, Quick Quid etc… will lend you money on a short-term basis for a very, very high interest rate.
Loan sharks are unlicensed money-lenders, who often charge astronomical rates of interest. They do not comply with financial regulations and you have almost no protection if they don't abide by the agreement you make with them.
Credit referencing agencies
Before giving you credit, lenders such as banks and catalogue companies want to be confident that you will repay the money they lend. To help them do this, they may look at the information held by companies called credit reference agencies and may also use credit scoring. You check your own credit history via one of the follow credit reference agencies:
National Debtline has some really handy informaiton which explains what credit reference agencies are and how they work.
Managing your debts
Some debts are termed as priority debts as non-payment poses a very high risk, e.g. losing your home, utilities being cut off, fines and even imprisonment. Other debts such as an overdraft, credit card, store card etc… are generally considered as non-priority debts. If you would like help managing your debts you can contact us. You can also contact National Debtline and Stepchange as they are also here to help if you would like support with managing your finances.