Since the late 1990s the majority of students heading off to university, have had to pay for their education through the means of a student loan, which unfortunately has left them saddled with debt when they enter the ‘real world’.
The fact that tuition fees have now risen to £9,000 per year at most universities within the UK, means that those students with loans will have debts of at least £27,000 once their course has finished – and that’s not even taking into consideration accommodation costs and general living expenses, which of course could amount to a whole lot more.
If you’ve managed to land yourself a massive salary after university, then you may think it was all worth it as you are on your way to pay it off, but unfortunately many students are left with this debt hanging over them for years, and the worry is whether this debt will affect your chances of getting a mortgage in the future.
Will having a student loan affect my credit rating?
There is good news though – most student loans shouldn’t affect you too much, in the same way that other forms of debt can. If you took out a student loan post-1998, this won’t show up on your credit rating, so if you’re applying for any other forms of credit such as a mortgage or a credit card then having a student loan shouldn’t cast a dark shadow over your application in terms of your credit history.
However, don’t get complacent and think that it won’t affect you at all.
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Getting on the property ladder
If you are applying for a mortgage (whether it’s for the first time or you’re due to remortgage), then your student loan payments could affect how much you are able to borrow.
You can use a mortgage calculator to work out approximately how much you’d be able to borrow based on your current salary – however this is only for illustration purposes to give you a basic idea. When you actually come to apply for your mortgage, the actual amount may differ slightly depending on your ability to make the monthly repayments.
When applying for a mortgage, strict lending rules mean that your lender must check affordability – i.e can you afford to make the monthly repayments in order to repay the loan.
As well as your income, you’ll be asked to list any current outgoings – the main factors being outstanding debt that you are paying off. This can include things like overdraft payments, credit card bills and other essential payments such as car finance or childcare fees.
Although student loans aren’t treated in the same way as regular debt on your credit file, if regular payments are coming out of your wages then your lender will include this amongst your outgoings when determining how much you are able to afford to pay back.
If you’d like further advice on buying a property after leaving university, and what you are able to afford then you can speak to an independent mortgage adviser for more information.
The above post is intended to be informative but does not constitute advice – financial, legal or otherwise. Any opinions given are the author’s own and do not necessarily reflect the views of SO Media or the Mitchell Farrar Group.
THINK CAREFULLY BEFORE SECURING OTHER DEBTS AGAINST YOUR HOME. YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.