Future Finance loans and the alternatives
When funds get tight, you won't be alone in feeling tempted by a private loan. But, there are a lot of factors to consider before taking one out, including these other, lower-risk alternatives.
Whether online, at uni or even on public transport, you've likely come across an ad for private loans aimed at students. And one company which keeps popping up is Future Finance.
It's no secret that there are some major issues with how the government's Maintenance Loans are calculated, particularly as they're based on your parents' income.
But, at Save the Student, we're really concerned to see private loan companies try to profit from this issue by offering students loans that have a much higher interest rate than we think is fair. More worrying still is that the advertising of these loans isn't always as transparent as we'd hope (or, if we're honest, expect).
We think that private loans should only ever be used as a last resort. If you're considering taking out a loan with Future Finance, or a similar private loan company, we'd strongly recommend you consider the alternative options outlined below.
Who are Future Finance?
Future Finance Loan Corporation Limited is a for-profit company that offers private loans to students in the UK – with pretty high interest rates.
Their website advertises loans of up to £40,000. While their interest rates vary, in September 2020 there was an example on their homepage of a £4,000 loan for 112 months with an interest rate of 20.4% APR (variable) – this would result in a sizeable repayment of £10,958.36.
Unlike the government's Student Loans, which you only start to repay when you're earning a certain amount, the repayment of Future Finance's loans start while you're still at uni and could potentially increase before you start your graduate job.
During your degree, you'd need to start repaying the loan in reduced monthly amounts – the example loan on their homepage has it as £5 a month. But, there's no guarantee it'll be this low for everyone – in fact, it could be anything up to £75 a month while you're still studying.
As the average student is already spending £223 more than they receive in Maintenance Loans each month, it's difficult to see the benefit of taking out a loan at uni if the repayments add to your monthly spending.
Future Finance then give you up to three months after you graduate before charging significantly higher repayment amounts. In the case of the example loan on their site, this would be 84 payments of £128.79.
But, unfortunately, not everyone manages to secure and start their graduate job within three months of leaving university – not to mention that it's something which can be really difficult to predict while still at uni. The pressure to start repaying the loan in bigger instalments could add to the already stressful period of graduate job searching.
Save the Student's student money expert, Jake Butler, said:
Every student's situation is different, but I would suggest that if you're considering taking out a loan like this, it should be as a last resort.
Borrowing money with such extortionate interest rates can have serious implications and will likely be something you live to regret.
Companies such as Future Finance target students that are desperate by offering what appears to be a quick and easy fix. I would urge any prospective borrowers to look into their alternative options and make the right decision, even if it seems tricky in the short term.
It's a much safer option to start with the official Student Loan from the government and try the other alternative funding options first.
Previous controversies with Future Finance
You may remember that, in August 2019, we reported on the news that UCAS had sent an email to students with marketing material about Future Finance. In response, there was (not surprisingly) a fair amount of shock and outrage on Twitter.
Among those calling out UCAS for the email were students, the NUS, academics and Save the Student.
In our news piece about the controversy, we looked into past complaints about misleading aspects of Future Finance's marketing. At the time of reporting, for example, we were told by the Advertising Standards Authority that they had received five complaints about Future Finance's ads at the time of enquiry in 2019.
Although one was dismissed, the complaints highlighted that their interest rates weren't indicated in adverts and that they'd written 'student loan' in bold, which could have implied they were official Student Loans provided by the government.
Worryingly, we noticed similar things in the email from UCAS which did not include Future Finance's interest rates, and had the phrase 'Wherever you're heading, our flexible Student Loans can help you get there' written in bold.
Particularly when taking out a loan, it's so, so important to be as informed as possible to help you make the right choice. Make sure you're fully aware of your options for funding at uni by checking out the alternatives to private loans below.
Alternatives to Future Finance
To avoid taking out a private loan, these are the best funding options if you need more money at university:
Student Loan from the government
As the first port of call for funding at uni, we'd always recommend the government's official Student Loan.
While the way it's calculated is by no means perfect, it has a really manageable and secure repayment method whereby you only repay a percentage of your earnings over a certain amount of money (and stop repaying if your salary ever drops below that threshold). So, your monthly repayments should never be anything more than you can afford.
As we mentioned earlier, Future Finance expect you to start repaying the loan they've given you while you're still at uni. After you graduate, you'll have up to three months before the monthly repayment amounts of their loans increase significantly.
Future Finance do also say that you can take two three-month breaks from repayments if you're struggling for money after uni, but the interest would still be added to the loan during these periods.
While interest is also added to Student Loans from the government, it's a fraction of the percentage added by Future Finance.
Plus, you only have to repay your government Student Loan for a certain amount of time (depending on whether you're on Plan 1, Plan 2 or Plan 4) before the debt's cancelled, so the majority of people will never repay theirs in full. Future Finance, on the other hand, require you to pay their loans back in full, with the added interest.
If your Student Loan from the government isn't big enough, we have plenty more funding suggestions below. And, to find out more about your Student Finance options from the government, check out our Big Fat Guide to Student Finance, head to gov.uk or chat to student support at uni.
Extra Student Finance
After getting a Student Loan from the government, there is, unfortunately, a risk that this alone won't be enough to cover all of your living costs.
If this is the case for you, you can next look into other extra Student Finance options, like grants, bursaries and scholarships.
There are lots of different types of funding students can apply for, such as:
- Scholarships for students from ethnic minority backgrounds.
- Disabled Students' Allowances (DSA) which are available to students with mental and physical health problems.
- NHS bursaries, including the NHS Bursary, the Learning Support Fund and Social Work Bursaries.
- Scholarships for international students.
You may also be surprised by how niche some other scholarships, bursaries and grants are. For example, you could get a grant for being vegetarian, a bursary for having the surname 'Graham' or even a scholarship for being talented at e-sports.
If your parents are in a situation where they're happy and able to support you financially at uni, it's far less risky to receive zero-interest funding from the bank of mum and dad, than it is to take out a high-interest private loan.
For a private loan as a student, you would likely need a guarantor – this is somebody who would agree to make the loan repayments on your behalf if you're unable to keep up with them yourself.
When referring to who can be a guarantor, Future Finance say on their website:
For students, the most common choice is a parent, or another member of their family, such as a sibling, aunt or uncle.
So, if you were unable to repay your Future Finance loan, your guarantor (likely a parent) would be required to cover the repayments – which of course would include interest.
It's worth seeing if your parents are happy to give you some money so you can avoid a private loan. In the long run, this could save you and them from having to pay interest on repayments.
To see how much the government expects your parents to give you, check out our parental contributions calculator (for students from England and the EU).
Of course, not all parents can or do give money to their kids at uni. You could also reach out to other members of your family and close friends to see if they could help you out financially – this might still be as a loan rather than a gift, but hopefully with no (or minimal) added interest.
Got some spare time at uni between contact hours? Having a part-time job that fits around your studies can make a massive difference.
It's one of the most common ways that students fund their living costs, with 74% working part-time. While they're not for everyone, depending a lot on your degree and uni hours, a flexible job can be a great way of making money, while also boosting your CV.
For a lot of students, this can involve working shifts in shops, restaurants and pubs – these examples of jobs may be harder to find in 2020/21 due to the coronavirus pandemic, but there are also a number of other types of jobs you could apply for, too.
If you're looking for ideas, have a read through our list of the best-paid part-time jobs for students.
0% student overdraft
One of the best perks of having a student bank account is that you can arrange a 0% overdraft. This essentially means that you can borrow money from the bank, without having to pay any interest on it.
When you arrange this for your account, you'll be given a maximum limit for the overdraft and, as long as you don't spend over that amount, you won't be charged any extra for using it.
If you're in the position where you feel like you need to borrow money to cover uni living costs, we'd urge you to get a 0% overdraft from the bank first, with as high a maximum limit as you can.
Choosing this route rather than borrowing from private loan companies, like Future Finance, gives you an emergency fund to help you get through to your next loan instalment, without added interest.
Sell unwanted belongings online
If you're looking for quick ways to make money, try rummaging through your belongings to see if there's anything you'd be happy to part with.
Along with the other suggestions on this list, selling your unwanted things can help you avoid taking out a private loan unnecessarily.
It's super easy to make money selling things online – this can be anything from old CDs, DVDs and games, to old toilet roll. If you think something could have a purpose to someone, somewhere, stick it on eBay.
You could also try raiding your wardrobe for clothes you no longer wear and sell them on sites like Depop.
Student credit cards (repaying the balance every month)
When used carefully, with the balance cleared before the deadline each month, student credit cards can help you get by in the last few weeks before the next instalment of your Student Loan.
If you're not confident you'll be able to pay off the balance in time, don't use them – try getting an extension on your zero-interest overdraft instead. But, when you're unable to dip any further into your overdraft, and you're sure you'll be able to repay the money in time, a student credit card can be a good option.
Look out for ones that offer a 0% interest period as an introductory offer. This way, you should be able to make emergency purchases at the end of term without paying any extra interest on top of what you've borrowed.
Credit union loans
Tried all of the above and still struggling for money? Before heading to a private loan company like Future Finance, you could consider taking out a loan from a credit union.
Credit unions are non-profit organisations which are set up by communities, and they're intended to help people avoid private loans when they're in need of money.
They generally have much lower interest rates than private loans, so it's worth seeing if you can find one which suits you and has reasonable rates, before heading to commercial lenders.
And, if you're unsure where to look, you can head to this website to find credit unions to apply for.
Crowdfund your degree
While this is by no means the easiest suggestion on the list, it's still worth considering the option of crowdfunding your degree.
We've heard some great success stories about students who have done this. It'll take some time and effort to set up the best possible online crowdfund page, and you'll need to work hard to get the word out there about your campaign on social media. But, if this method works, it really works.
And, if you can run a successful crowdfunding campaign for your degree, this not only means you can avoid private student loans, but it would also massively boost your CV, showing that you have some impressive skills and dedication.
Take a year out to save money
While we completely get that you might want to crack straight on with your studies, we'd suggest at least having a think about whether a gap year before or during your degree could be worth it.
It might seem like a drastic step, but taking a year out to work and save money can make a massive difference to your finances. And, if you take the year out now to earn the cash you need, instead of borrowing money from lenders like Future Finance, it could save you making private-loan repayments for years ahead.
This is definitely not a decision to rush into. Before deciding whether this is the right step for you, talk to your university about it as they may be able to offer you hardship funds or other support to help you avoid taking a year out – which brings us onto our next point.
Discuss your options with university student support
Everyone's personal financial situation is different at uni.
In this guide, we've outlined the best general alternatives to private student loans, but to ensure you make the right decision for you, please also talk to student support services at your university to get tailored advice.
They'll be able to assess your personal situation and suggest the best next steps. It may be that they offer you hardship funds, or highlight which specific grants, scholarships and bursaries you could apply for.
Remember that they're there to help you, and you'll never know what support they can offer you until you ask.
Find out the best ways to manage your money and budget effectively at uni with our simple guide.