Student debt unravelled

Why debt isn’t all bad – and how to manage it

Baffled by borrowing? Read our guide to debt – the good, the bad and the ugly – and get tips for staying on top of it

General information about overdrafts

An overdraft limit is a borrowing facility which allows you to borrow money through your current account.

There are two types of overdraft - arranged and unarranged.

An arranged overdraft is a pre-agreed limit, which lets you spend more money than you have in your current account. It can be a safety net to cover short-term outgoings, like an unexpected bill. It is not suitable for longer-term borrowing. We charge you for every day of the month that you use your arranged overdraft where you go beyond any interest free limit you may have.

An unarranged overdraft is when you spend more money than you have in your current account and you have not agreed an arranged overdraft limit with us in advance or you have exceeded an existing arranged borrowing facility.

You can only make payments from your account if you have enough money in your account or through an arranged overdraft to cover them. Barclays will always attempt to return any transaction that could take your account into an unarranged overdraft position. Having enough money in your current account or having an arranged overdraft limit could help prevent payments such as priority bills from being returned unpaid.

On very rare occasions we may be unable to return a payment (e.g. due to an offline transaction made on a flight) and the account may enter an unarranged overdraft. No additional charges will be applied in this situation.

Information regarding the conduct of your account may be sent to credit reference agencies. As with any debt or borrowing, this may affect your ability to get credit in the future.

Our Eligibility tool can show you the likelihood of getting an arranged overdraft and the overdraft calculator lets you see how much it could cost to use an overdraft. To use these tools and find out more about overdraft charges, please scroll back up this page.

Barclays, Leicester LE87 2BB

These days, borrowing money – whether it’s from your bank, mum and dad or a student loan – is generally unavoidable. But borrowing, and the debt that comes with it, isn’t necessarily a bad thing. It’s all about how you manage it.

Let’s bust some of those borrowing myths and take a look at different types of debt – plus how you can stay on top of each one.

‘My student loan debt is huge – paying it back when I graduate will be tough’

Wherever you’re studying in the UK, it’s likely, if you’re a UK resident, that you’ve taken out a student loan to cover your tuition fees (and probably a loan to cover living costs, too). With graduates in England leaving university with considerable debt, it can be difficult to imagine how or when you’ll ever be able to pay it back.

Don’t panic. You won’t be expected to pay it off the minute you’ve thrown your cap in the air at graduation.

Student debt is different to other types of debt – you only begin repaying it when you’re earning above a certain threshold. In England and Wales, from 6 April 2020 the repayment threshold will increase from £25,725 to £26,575 per year1 2.

Repayments only increase when you start earning more and they pause if you stop earning. It’s also worth noting that student loan debt doesn’t affect your credit score or appear on your credit report (though if you’re applying for a mortgage, loan or credit card, you may be asked about it in your application). Not as scary as it first seems, right?

If credit score chat has you confused, learn more about credit ratings.

‘I’ll just get a payday loan until my loan instalment comes in next week, no big deal’

When you’re struggling at the end of term, it might be tempting to go to a payday loan lender for a bit of extra cash. What’s the harm if you’re going to be able to pay it back in a few weeks, right? Wrong.

Payday loans have very high interest rates (meaning you’ll pay back a lot more than you borrow), and is important to note that by taking a payday loan, regardless of whether it is paid back on time, it can adversely impact your ability to get credit.

‘Credit cards are bad news because it’s easy to lose control of your spending’

When used wisely, a credit card can be a good way of staying in control of your finances. They can be useful for spreading the cost of a big purchase.

If you make repayments on time each month, using a credit card also helps prove to lenders that you are a responsible borrower. That can boost your credit rating making it easier to get a mortgage, loans, credit cards and even mobile phone contracts in the future.

Make sure you don’t miss repayments, though, as that could damage your credit rating. Only use a credit card if you can repay however much you borrow and make at least the minimum repayment amount each month. If you can, try to pay a bit more than the minimum amount, which means you’ll clear the debt sooner and pay less interest overall.

You can find out more about credit cards, and how to improve your credit rating at barclaycard.co.uk.

Understanding the benefit of an interest free arranged overdraft

Most student current accounts offer an interest free arranged overdraft that can be increased during your studies. An arranged overdraft is a borrowing facility that allows you to borrow money through your current account – and, in the case of interest free overdrafts,  you won’t be charged for doing so.

Remember, though, that you will need to pay it back. The interest free agreement of a student overdraft eventually ends after you graduate, so its best to start paying it back as soon as you can.

For example, when you open our Student Additions account, you may be eligible for an interest-free overdraft of up to £500 in your first term, and increasing amounts of up to £1,500 while you’re studying.

No interest is payable on arranged overdrafts.

All student overdrafts are subject to application, financial circumstances, borrowing history and lending criteria, so your maximum arranged overdraft amount may be different than the amounts shown below.

Maximum interest-free arranged overdraft limits

  • Account opening, during your first term: up to £500
  • Year 1: up to £1,000
  • Year 2 and beyond: up to £1,500

Overdrafts are repayable on demand and you must be over 18 and a UK resident to apply. Interest charges are variable.

You can contact us at Barclays, Leicester, LE87 2BB

After you graduate

Once you’ve graduated we will look to move you to the Higher Education Account which is available for three years after you graduate - a perfect next step after you’ve completed your studies. Find out more

‘Being late on a utility bill once or twice won’t matter much’

Getting into debt with your utility bills could result in your gas or electricity being cut off, a weakened credit score or even a court summons.

Where possible, try to have every housemate’s name on bills so that everyone is responsible for their share. If yours is the only name on the bill and a flatmate leaves you in the lurch, you’re liable for the whole sum.

Save yourself stress and set up standing orders or Direct Debits for all your bills. You can set up standing orders in the Barclays app3, and check your active Direct Debits – download the app and register if you haven’t already.

We’re required by regulation to automatically register personal customers for some alerts. You can also set up optional alerts to keep track of your cash. You’ll only be able to receive alerts if you’ve provided us with your current mobile number. Register to get optional alerts.

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