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An increasing number of young people today are taking the opportunity to remain in further education once they have finished school and obtained their GCSE’s.

Many stay on to do A levels, or equivalent courses and a growing percentage of these students go on to University, partly to further their education, but in many cases simply because there is a distinct lack of jobs available to them otherwise. At this time of year, a large number of young people are busy applying for their student loans to cover some of the costs they will incur whilst at University, along with an assessment of their parents income to check to see if they qualify for the full amount of the loan, or other additional benefits and grants.

Whilst students are busily applying for loans to see them through college, the vast majority of them never stop to consider what they intend to do once they have completed their degree and how they will cope with their finances and loan debts once they have to start and work for a living.

At this time of year there are large celebrations as those students who have been studying for the past three years, or more in some cases, finally don their rented gowns and receive their degree at their graduation ceremony. But once the hangover from the champagne has worn off and they have taken a well deserved holiday, these graduates have to start thinking about getting a job with a decent amount of pay and start to manage their finances and outstanding student loans as well as other credit card, overdraft and loan debts.

It is thought that the typical student graduating from University is likely to have in excess of £20,000 worth of debts, mostly on student loans, but also on credit cards, overdraft facilities and personal loans. Despite the fact that student loans offer an extremely cheap loan option, with no repayments becoming due until the student starts to earn at least £15,000 and even then with interest rates in the region of around just 2 per cent, they are still a debt which needs to be repaid and will have an impact on the individual’s credit rating and ability to obtain a further loan of any kind.

Once a student completes their degree course and leaves University, this is unlikely to be the end of their financial needs and expenses. In many cases, graduates will have to carry on further education or specialist training for a particular job they want, or need to buy a new car in order to be able to travel to work, for example. Bearing in mind that they have no immediate income and in many cases large student loan debts, the majority of graduates are likely to need additional funding to help them get established in their eventual career and this is where graduate loans come in to effect.

A graduate loan differs from a student loan in two main respects. Firstly, they are generally more expensive than a student loan and secondly, the borrower will have to start making loan repayments as soon as the loan has commenced. In other respects, a graduate loan works pretty much in the same way as an ordinary personal unsecured loan, apart from the fact that the interest rates charged are usually less than those on a normal personal loan, although this can depend on an individual’s personal credit rating and if a graduate has a poor financial history, with arrears and possibly County Court Judgements (CCJ’s) the rates charged on any new loan will almost certainly be much higher than for someone with a clean record.

The majority of high street banks will offer attractive deals to graduates, with regards to personal current accounts and rates on graduate loans in order to attract new customers. In the vast majority of cases, the bank which a person chooses as a student is often the bank they will remain with to manage their finances for the rest of their lives, which makes banks and lenders keen to offer the best deals to graduates and students and is also the reason why graduates should shop around extremely carefully for the best deal to suit their particular needs.

As an example of the differences between different banks, the interest free overdraft facility on a graduate current account can vary form just £1,000 up to £3,000 and the interest rate charged on a graduate loan can vary from 9.9 per cent, all the way up to 19.9 per cent APR (Annual Percentage Rate).

Once a graduate starts work and begins to earn money on a regular basis, it is important that they make sure they clear their outstanding debts as quickly as possible. Priority should be given to those debts which charge the highest rate of interest and in most cases these should be cleared first. This is most likely to be credit card debts (apart from zero per cent interest deals) first, followed by interest charging overdrafts and then personal loans.

Graduate loans and student loans are usually fairly cheap loans, but these still need to be cleared quickly, as they can have an impact on a person’s potential for future borrowing, particularly when it comes to wanting to buy their first house and apply for a homeowner loan or mortgage, as the annual amount of any loan repayments are deducted from the applicant’s salary before any income multiplier is calculated by the lender.

For many graduates who need additional funding once they have finished their education, it could well be the first time they have applied for anything other than a student loan and may therefore be unaware of what to look for in order to obtain the best deal to suit themselves on a graduate loan.

The first thing to consider is how much you actually need to borrow. There is no point borrowing more than is needed just because the lender has approved this amount, although often the interest rate charged (APR) will reduce on larger loan amounts, which could be useful for consolidating other existing debts which charge a higher rate of interest, such as credit cards and overdrafts. Compare interest rates between different lenders, don’t just assume that they will all charge the same rate for the same kind of loan.

Be aware of any fees or charges which may be applied to the loan, if you think you may be in a position to overpay on the monthly repayment amount, or repay the whole of the loan early, check to see if there are any penalties for doing this. Sometimes it can work out cheaper to take out a loan with a higher interest rate but no early repayment penalties, particularly if the loan is to be paid off in the first year or two.

There are various types of protection policy which can be taken out to cover either the loan repayments, or the full balance of the loan, should anything happen to the borrower. The lender is likely to offer their own product to cover this eventuality, but they are required by law to wait until 14 days after the loan has been granted, during which time it makes sense to look at what cover other providers offer. There is absolutely no obligation to go with the company which provided the loan and you could well save yourself a lot of money on loan insurance by shopping around for cover.

Finally, it is important to remember that banks and building societies are looking to get graduates as new customers and therefore will all offer incentives to try and attract their business, as they see these individual’s as long term, high potential customers for future business. Therefore you should not rush to the first bank you see, grateful for the fact that they will take you on, but shop around all the banks to ensure you get the best deal for yourself, not only on a new current account, but also on a graduate loan and other benefits which the bank may be prepared to offer.

Remember, banks need you more than you need them!