Video Transcript – The basics of borrowing and debt
That’s all good about savings, investments and avoiding scams but what if you do not have any money to save or invest but often your money runs out before the end of the month, and you need to borrow to make ends meet? Borrowing to deal with an unexpected expense or fluctuations in your income makes sense provided that your long-term income and expense match. If over a year your income from all sources (family, part-time job, student loans etc.) is £15,000 and your expense are a bit less than that, then you are financially in a sustainable position.
If occasionally there is a big expense and most of your income will come later in the year, borrowing can be the most efficient way to bridge the gap and allow you to maintain a reasonable standard of living. But if in the long-term you spend more than your income and you borrow to plug the gap, you will end up in a debt spiral which is really dangerous. If you are already in this type of situation, do not try to sort it out by yourself: DO CONTACT A DEBT ADVISOR: https://www.gov.uk/debt-advice
Video Transcript – Personal Loans and Graduate Loans
If, as a student, you work you may be able to access a personal loan for a period of time usually 5 to 7 years. These are much cheaper than overdrafts and credit cards i.e. the interest rate is lower. But they are only available for people with employment income or if you can get a relative to act as guarantor. After you graduate it is much easier to get a personal loan, as most banks offer “graduate loans” even if you do not yet have a full-time job. So, if you are about to graduate and want to live independently while looking for a full-time job and need some money to cover your expense until then a graduate loan is an option and is much better than relying on overdrafts or credit card debt.
A major UK bank for instance, offered in March 2025 graduate loans up to £10,000 for up to 5 years at a rate of 12.9% provided that you earn £850 a month after tax. When a bank gives out a loan to a customer like this, they are required by regulation to check if the loan is affordable. If for instance you are trying to borrow money to repay previous debts and the bank fails to discover this although it was easy for them to find out, the customer can then complain to the Financial Ombudsman Service and potentially get to only repay the capital of the loan without any interest. So, if you got into a situation that you borrowed while on a debt spiral and your bank could have known, do get in touch with the bank first making a complaint and if they refuse to reimburse the interest you have paid bring a complaint to the Ombudsman. You can find more details here: https://www.financial-ombudsman.org.uk/.