Student 101: Dealing With End-of-Term Money Emergencies

A new survey has revealed that one in six students will have spent their entire student loan within the first month of university. According to the research, your average student spends their first term’s loan within 51 days, with one in six spending the entire borrowed amount within just 28 days. Duncan Jennings, co-founder of the website which commissioned and funded the research, said: ‘Our research shows the current crop of students will be running out of cash three and a half weeks before the end of their first term.”

This end-of-term shortage is not a new problem; it is an annual conundrum which has faced every generation of students for the last few decades. The problem facing students is how to manage this cash-starved period until the next loan repayment. The best way is, of course, to manage the lean period by making provision for it and saving some of your loan for later. However, if you’re reading this, chances are it’s already a little too late for that, so here are some tips and advice on a few short-term solutions. It must be stressed that, as you’re borrowing money that you don’t have, all of these methods are high-risk, and they should only be used in cases of extreme hardship.

Extend Your Student Overdraft

Most banks offer the option to temporarily extend your overdraft, typically by £250-300. This is a quick and easy way of raising funds, and the majority of banks will have student loan advisors for you to talk to. If you’re applying for an overdraft extension, then you’ll need to take your loan schedule notification with you. It’s always a good idea to ask for the extension to last for a few days past the date when your next loan payment is due. Be aware, however, that you may have to pay interest on this facility. This method should only be used in extreme cases, as it usually means that you’ll have even less money at the end of your next term.

Apply for a Short-Term Loan for Students

If extending your overdraft isn’t an option, then it might be worth considering a short-term loan. Make sure that you apply to a specialist short-term student loans enterprise, like Smart-Pig, as these tend to be a safer form of borrowing than other short-term or payday loans. They tend to have a much more altruistic ethos than ordinary lenders, and will often place a safety net interest cap on the amount students borrow so that, even if you run into trouble with your loan, the amount of interest you can owe is fixed at a proportion of the amount you borrowed. In their favour, they also tend to be significantly cheaper than taking out an unauthorised overdraft on your student account or rolling over other forms of short-term lending. However, bear in mind that whatever you borrow will have to be repaid, potentially with interest on top of the original amount.

Apply for a Credit Card

Applying for a credit card is something that you really don’t want to do, and it should only be considered if you’re absolutely certain that there is no other option. If you decide to apply for a credit card, always shop around to make sure that you get the best interest rate. As a student, you constitute a high credit risk, and some card providers will charge you a huge APR to cover this. The golden rule of credit card repayments is to pay off your balance as soon as you receive your next student loan instalment, in order to avoid paying huge interest charges. Like an extended overdraft, a credit card should be considered a temporary measure, as the knock on effect of the loan will be felt at the end of the next term.

Whatever method you choose, view the inevitable interest as a fine for your foolishness, so that, next term, it pushes you to budget in advance.

Comments are closed.