Loans for students
Most students have to operate on a shoestring budget, but when a financial shortfall hits, thankfully there are a number of options to consider.
Read more…Do student loans affect your credit score?
It’s common to still be paying off your student loan many years after graduating, but does this affect your ability to be approved for other loans?
Although the borrowing terms on student loans are widely seen as generous, with interest rates you’d find almost impossible to get from a traditional lender, it can still be frustrating to see a chunk of your monthly paycheck being swallowed by student loan repayments for years on end.
Do student loans appear on my credit file?
Despite the fact that it’s essentially a low-rate, flexible loan, your student loan debt doesn’t appear on your credit file and will almost never affect your ability to be approved for credit.
Your credit file lists your borrowing history, including past applications and failed repayments, but your student loan won’t appear on it at all. Normally, applications for credit and repayments of credit are reported back to credit reference agencies (CRAs) by lenders, but this is not the case with your student loan.
The exception to this rule concerns students who started university before 1998 and defaulted on their loan.
Given the way that student loans are administered, it’s quite hard for most people to miss a repayment. Would-be lenders want to see that an applicant has borrowed responsibly, but since student loan repayments aren’t reported back to CRAs they won’t help.
Does student loan debt affect my ability to be approved for a loan?
The only way a lender will know that you have student loan debt is if they ask you.
Under new rules made under the Mortgage Market Review (MMR), a mortgage lender may well ask you this and use your answer to consider whether you’re eligible for a loan.
Usually, though, this is just so it can get a better idea of your net income. Banks must lend responsibly, and that means looking at your income and outgoings to make sure that loan repayments would be affordable. The amount of your monthly student loan repayment will change according to your salary, which lessens the impact further.
Having a student loan is unlikely to make or break the ultimate decision on your creditworthiness.
Should I pay back my student loan early?
It is possible to pay back your student loan early, cutting the total amount of interest you pay on your debt.
However, the interest rate on a student loan is are so low that you might find it more profitable to save or invest this money. In some cases, the debt will be wiped before you fully repay it anyway.
As such, it’s best in many cases to let the loan repayments continue to be automatically deducted from your salary.
Paying back your student loan early will have no impact on your credit score, and little impact on your eligibility for most loans.
Tips
Do:
- Take out a student loan if you need one. It’s the best rate loan you’ll ever be approved for and the impact of your debt after graduating is minimal.
Don’t:
- Worry about your student loan debt affecting your ability to get a loan. Even with mortgages, the impact on a lender’s decision is typically minimal.
Bottom line
You should always be taking steps to improve your credit score, especially if you’re planning on applying for a big loan in the near future. Repaying your student loan debt isn’t an action that should top your priority list, though, as its impact on lending decisions is negligible.
Back to topRead about how different factors can affect your score
G
Popular Reads
How student loans work: Student finance explained
Discover whether you’re eligible for student finance, how much money you might get and how the repayments work with our ultimate guide to student finance.
Read more…
Student savings guide
Find our best student discounts, deals and guides to help to stretch your loan even further. From fashion to banking, here’s all you need to know.
Read more…
Loans for migrants and international students
Discover the most reliable means for migrants and international students to borrow money in the UK
Read more…We show offers we can track - that's not every product on the market...yet. Unless we've said otherwise, products are in no particular order. The terms "best", "top", "cheap" (and variations of these) aren't ratings, though we always explain what's great about a product when we highlight it. This is subject to our terms of use. When you make major financial decisions, consider getting independent financial advice. Always consider your own circumstances when you compare products so you get what's right for you.
More guides on Finder
-
Who owns your credit card?
Knowing who owns your credit card will help ensure you find the best credit card deals.
-
How to switch credit cards
Looking to get a better credit card deal or pay off your existing debt faster? Here’s how to switch credit cards in 5 steps.
-
Best credit cards for graduates
If you’ve recently graduated and want to apply for a new credit card, find out how to go about it and what to watch out for.
-
How many credit cards should you have?
Thinking about getting another credit card? Having multiple cards can help your finances, but only if you use them correctly.
-
Buy now, pay later vs credit cards
With the rising popularity of buy now, pay later, we look at how it works and if it’s a suitable alternative to credit cards.
-
Compare the best business credit cards of 2022
Saving time on expense reports and streamlining your cash flow are just a couple of the many perks you could enjoy with a business credit card. Compare interest rates and check your eligibility today.
-
Invest in bond ETFs
Find out what Bond ETFs are and how to invest in them.
-
What is a good credit score?
Find out the difference between a credit score and a credit report, plus the factors that can push your score up and down.
-
Agricultural mortgage
What you need to know about getting a mortgage if you’re buying or refinancing a farm or farmland, including the factors lenders consider when you apply for one.
Ask an Expert