The summer of graduation can be one of the most simultaneously joyous and depressing times of your life. On the one hand you get to celebrate the fruition of several years in study, but on the other, you have to say goodbye to student life and prepare to find work.
You may have been fortunate enough to have got through your studies debt-free. More likely though, you will have accrued a lot of debt on your way to graduation: perhaps you have a student loan, and maybe you have an overdraft balance as well.
You may also be thinking of further borrowing as an investment for the future, such as a good suit to make that great first impression at interviews.
This is an important time for your finances. The debts you have accrued will have to be repaid while you try to get yourself on an even financial footing.
If you have a student loan, it may be cheaper than any other type of loan you can get, with the advantage being that you need to be earning a certain amount before repayments need to be made (currently this is set at £21,000 per year).
If you are going straight into a job paying over £21,000, make sure you let your accounts department know. They should then set up your repayments to be taken straight from your wages, just like Income Tax and National Insurance.
Remember that a student loan is a long-term loan. You may not like it hanging over you, but there is no need to repay it early. A bank or building society probably won't be able to offer you as good a rate or terms as you get from the Student Loans Company.
If you already have a student account, your bank will usually automatically change this to a graduate bank account. As well as reflecting your new status, this is also a crafty move that encourages you to stay with them.
Over the next few years, your interest-free overdraft allowance (if you have one) will be gradually tapered down, the idea being that you repay your debt in stages as you secure a job and therefore the income to do so.
Something that isn't well publicised is that you can change your graduate bank account between providers. You don't owe your bank any loyalty. Just like you can do a postgraduate degree at another university to your undergraduate degree, you can also switch to a new bank if it benefits you to do so!
You can transfer your graduate account – together with the overdraft balance – to a new account. Usually you'll want to look at the bank that will offer the largest interest-free overdraft facility, over the longest period.
Even if you graduated a little while ago, you may still be able to change to another graduate current account. You will normally have to show proof of your graduation to open a new account.
It's important that you don't use your overdraft for frivolous spending. It's the cheapest form of credit you will ever be offered, so use it wisely. By all means borrow for things that you need, but your primary focus should be to reduce your debt, not increase it.
The overdraft facility on a graduate bank account is like a big comfy rug that's being very slowly pulled from under you. The interest-free offer is slowly removed by the bank over a couple of years.
You may be able to negotiate an overdraft at the current level, but that will involve paying interest and fees. If you can, you should make repaying your overdraft a priority.
It may be a fairly hefty amount that you need to keep back to repay the overdraft. For instance, an overdraft that will decrease by £1,000 at the end of a year will mean that you need to save back £84 per month! Find out how to start repaying your overdraft with our helpful money tips.
No. The main draw of these accounts is the interest-free overdraft limits – but you may not need or want an overdraft.
In this case, why not look at the wider world of current accounts? If you can fund your account with a certain amount every month, for example £1,000, you could compare bank accounts offering competitive interest rates and benefits.
If you don't have any debts, now is also a good time to get into the habit of saving. Things can be tight when you first start out, but even if you are only saving a little each month, putting money aside will move you onto an even stronger financial footing for the future.
If you've applied for a graduate bank account, you may also be eligible for a graduate loan. These generally offer reduced rates from the bank's standard loan offering.
You may wish to take out a graduate student loan to consolidate other debts you may have racked up at university, to replace your car, or to help with costs if you have to relocate for work.
Find the best graduate loans scheme to help fund the next step in your career
Take your parents as an example. Have they always used the same bank? It's likely.
Put simply, the banks offer you these great and tempting current account and loan deals to make you feel loyal to them. If you feel loyal to them, you'll be more likely to take a loan, credit card or mortgage with them in the future.
It's possible that you have also accrued other debts during the course of your studies. Credit cards, store cards and hardship loans will all need to be repaid at some point. And the sooner the better!
If you have borrowed on cards, you may have exhausted your interest-free overdraft limit. If you haven't, transfer as much of the most expensive balances as you can to your graduate bank account to save on interest.
Once you have a few months' employment under your belt you could apply for a 0% balance transfer credit card deal. Then transfer as much of your debt (most expensive first – which is most likely to be the store card) onto the new card. Cut up the old ones to avoid racking up more debt.
Disclaimer: This information is intended solely to provide guidance and is not financial advice. Moneyfacts will not be liable for any loss arising from your use or reliance on this information. If you are in any doubt, Moneyfacts recommends you obtain independent financial advice.
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