Taken out a Career Development Loan in the last few years? Here’s everything you need to know about paying it back.
Back when they were still around, Professional and Career Development Loans could give students up to £10,000 that remained interest-free while they studied on a course, postgraduate qualification or training programme.
Sadly, on 25th January 2019, the government scrapped the scheme, so the loans are no longer available.
But this doesn’t affect any existing loans that have been taken out, so if you’re looking for information about the terms and conditions of repayment, you’re in the right place.
What are Career Development Loans?
A Professional and Career Development Loan was a bank loan you could take out to help fund any courses or training that would help progress your career or help you to get into work.
The reason the loan was different from a personal loan was that you don’t pay any interest on the loan while you’re studying – this is paid for by the Government Skills Funding Agency instead.
You only start paying interest on the loan from one month after you finish studying when you should be in a position to start paying it back.
You decided how much money you wanted to apply for – as long as it was between £300 and £10,000, and you provided evidence it was going to be used for course fees, living costs or other learning expenses.
Alternatives to the Career Development Loan
That’s all very well and good, but now that Career Development Loans have been scrapped, what other options are there? Here’s a quick list of other funding options you might want to consider.
These options might not be available to everybody, but they’re worth looking into as every loan comes with risks and you could end up paying some hefty interest charges depending on how long you take to pay it all back.
Repaying a Career Development Loan
When you apply for your Career Development Loan you also set your repayment terms – which essentially means how much you pay back each month over how long a period of time. You can repay your loan over one to five years, or in a single lump sum.
Spreading your loan out over a longer period of time might mean smaller monthly repayments, but you’ll end up paying back more in the long run as you’ll accumulate more interest.
With a loan like this one, we’d recommend paying it off as quickly as you can before the interest stacks up.
However, make sure you’ll be able to meet your monthly repayments – if they’re too high and you’re unable to pay them, this will affect your credit rating.
The Co-operative Bank
The Co-operative Bank was a popular provider of Professional and Career Development Loans, offering an interest rate of 9.9% representative APR – which is the interest rate you’re likely to pay over the course of the agreement including any extra costs.
This table gives you a better idea of how much interest you’ll be paying, depending on how long you take to pay back the loan.
You may be able to find a personal loan with a better interest rate elsewhere. In this case, you could take out the loan with the lower interest rate to repay the Career Development Loan, and then pay back the new loan with smaller interest charges.
However, all loans come with risks, so make sure you research thoroughly before doing this and don’t forget to check early repayment conditions.
Don’t forget that you’ll still have to repay your loan if you drop out of the course, or the course provider goes out of business.
Can you repay early?
You are able to pay your loan off early if you’d like to, but you might still face some charges.
For example, The Co-operative Bank currently stipulates that if you agreed to repay your loan in one year or less, you’ll be charged 28 days interest if you decide to repay early.
If you agreed to repay your loan over more than a year, you’ll be charged 58 days interest if you repay early.
Fancy a career change? You can get into these industries with pretty much any degree.