Professional Studies Loan

A question about : Professional Studies Loan

Hi all,

By way of background, I took out a professional studies loan with HSBC in 2009 just prior to taking the CPE and LPC (enabling me to become a trainee solicitor, complete a two year training contract with a firm and qualify).

The loan was for Ј25,000 split over two years and the interest rate was 2.5% above base rate. I was offered a variable rate but decided to go with the fixed at the time since the economy was a little iffy! Repayments were to start 6 months after the end of my final course at a few pence under Ј400pm.

HSBC gave me Ј11,000 just before the start of my CPE for course fees and accommodation for the year, followed by Ј14,000 for the LPC. I asked them to split the payments like this so I wouldn't pay an extra year of interest on the Ј14k (couldn't find a savings account at the time that would pay over 8% interest, of course).

I'm now a trainee solicitor and a year away from qualifying (I carried out 18 months of paralegalling before my TC started - pretty common practice).

The base rate crashed shortly after I took my loan out and I've been paying only 3% interest on the Ј25k since the end of my LPC! When my payments started I had only racked up Ј1.1k of interest on the capital amount over the 2.5 years since I borrowed the initial Ј11k. A victory for me, I think!

Where am I now?

Trainee solicitors outside of London do not generally earn a great deal of money. Although I qualify in a year the payments currently are choking me financially, particularly since I am now required to travel to a different office further away for the next year.

Furthermore, I have a Ј1,200 overdraft and a Ј500 flexiloan that are both maxed out. My wages clear the overdraft at the beginning of the month and I go back down to the max throughout the course of the month.

Since payments started on my main loan I have brought the Ј26.5k down to Ј13k remaining, so I now owe (everything thrown in) a little under Ј15k.

I've looked around at debt consolidation loans as a way to bring my payments down but can't really find anything that would appear worth doing without being hugely to my detriment in the long run. At my current repayment rate and the low interest value I'm going to pay my loan off a LOT sooner than the original 8 year repayment term that I took the loan out on.

If I borrow Ј15k over, say, 5 years which is approximately the repayment term I have left on mine, I will end up saving myself about Ј120-140 a month which would be nice. Conversely, I would be paying a lot more in interest and be stuck to a new 5 year period.

Unless interest rates are about to shoot up, making a 4.8% fixed APR personal loan for Ј15k from HSBC or another lender suddenly attractive, I don't really see that it makes any sense other than to just suck it up and keep paying my loan off as I am currently, taking advantage of my low interest rate.

Sorry for the long post. Just trying to gauge some thoughts from you guys who I am sure are vastly more experienced and knowledgeable than I!

Thanks for any opinions offered .

Best answers:

• Looks like you've got a pretty good deal really. Although if the payments are difficult I think HSBC will negotiate a bit of a longer term if needs be (without being a 'financial difficulty' extension. I seem to recall they will review your PSL annually and adjust payments accordingly if it's detrimental).
  I'd talk to them first - Don't say you're in difficulty, just say you want to review options. I think it's a branch based product so in branch reviews only, not sure.
  Anyway, from what you've posted (and I skim-read it so forgive me if I'm wrong) you're on about 3.5% APR at the moment? Not sure I'd look to refinance that, although the overdraft and flexiloan are probably around a massive 18%
• I also suspect on your current salary with your current debt level that you would struggle to find anyone who would offer you a loan and definitely not at the headline rate.
  I think that what Caladan suggested is your best bet.