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Are student loans with min payments risky?

  • 24-05-2009 4:27pm
    #1
    DeadMoney
    Registered Users, Registered Users 2 Posts: 1,127 ✭✭✭


    Hi guys, I am considering taking out a student loan for €1500 to go away for the summer. I have contacted my local AIB branch who have said that I should be approved for the loan if I apply. However, I am a bit worried about the repayments method and I am afraid it will cost me in the long run. They have said the I have the option to just repay the interest for the first year. The interest rate is 10.20% so this would amount to around €85 for the year (I think).

    I intend to actually start making payments through out the year of the loan and not just the interest. So, a €1500 loan could probably take me 18 months to clear, or 12 months if I successfully land a job next summer (which is never a certainty in these times). I don't know anything really about loans and rates but I have heard the "nightmare" stories people sometimes have about student loans. Anyway can anybody please advise me here if this is a decent sounding loan or should I run a mile?
    Thanks!


Comments

  • #2
    AARRRGH
    Closed Accounts Posts: 12,382 ✭✭✭✭AARRRGH


    It's not the lowest interest rate you could get, but it's only "risky" if you decide to skip your payments and want a black mark on your credit report.

    Not sure if that answers your question...


  • #3
    DeadMoney
    Registered Users, Registered Users 2 Posts: 1,127 ✭✭✭DeadMoney


    AARRRGH wrote: »
    It's not the lowest interest rate you could get, but it's only "risky" if you decide to skip your payments and want a black mark on your credit report.

    Not sure if that answers your question...

    Thanks for the reply. I should be fine with repayments but like I said, I will probably only be able to make the min payments such as €50 per month. With regards to interest rates, do you think I could get much lower?


  • #4
    DeadMoney
    Registered Users, Registered Users 2 Posts: 1,127 ✭✭✭DeadMoney


    BOI are offering a student loan with a 9 month non interest period if the loan is repaid in full. I personally would not be able to have this all repaid within 9 months and after that is becomes standard student loan interest rate of 11.4%.


  • #5
    Toots
    Administrators, Business & Finance Moderators, Society & Culture Moderators Posts: 16,978 Admin ✭✭✭✭✭Toots


    DeadMoney wrote: »
    BOI are offering a student loan with a 9 month non interest period if the loan is repaid in full. I personally would not be able to have this all repaid within 9 months and after that is becomes standard student loan interest rate of 11.4%.

    Actually it doesn't become a standard loan. The idea is that you get the loan for 9 months with no interest. At the end of the 9 months, the loan has to be repaid in full. This can either be done by lodging intermittently during the 9 months, or by making one lump payment at the end of the 9 months.

    If after the 9 months you cannot clear the loan, they will restructure it into a term loan. It should be noted that this is counted as a loan refinance, as opposed to simply starting to repay a loan as normal.


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