# I feel bad about taking out a loan even though I know I can pay it back
**URL:** https://boards.straightdope.com/t/i-feel-bad-about-taking-out-a-loan-even-though-i-know-i-can-pay-it-back/730473
**Category:** In My Humble Opinion
**Created:** [September 9, 2015, 10:50pm UTC](https://boards.straightdope.com/t/i-feel-bad-about-taking-out-a-loan-even-though-i-know-i-can-pay-it-back/730473 "2015-09-09T22:50:04Z")
**Posts on this page:** 17
**Page:** 1
### Author:  [@Luke\_James](https://boards.straightdope.com/u/Luke_James)
#### Post date: [September 9, 2015, 10:50pm UTC](https://boards.straightdope.com/t/i-feel-bad-about-taking-out-a-loan-even-though-i-know-i-can-pay-it-back/730473/1 "2015-09-09T22:50:04Z")
I am considering taking out a £2,500 loan at a fixed interest rate of 12.5% before I graduate, and 10.5% after I graduate.
I begin making repayments immediately, I pay £20/month up until October 2016 and then the repayments are fixed at £36/month for 8 years (£3 more than my phone contract, heh) and I end up paying back around £4,500.
I work two jobs, but I won’t be able to keep doing this whilst I am studying so I will need to drop one, which will hit my finances hard. I have no savings, I’ve had to live off of my student overdraft and loan before I was working. Banks won’t lend to me as my credit rating isn’t good enough, but I am getting a credit card off of which I will pay for small things like lunch, to slowly build it up.
This £2,500 loan would just cover my living costs. I know that I can keep up with the repayments, I am getting a cheaper phone contract next month (£17/month) and I’ve had no trouble paying my current one on time.
It’s just the thought of taking out a loan, it just feels wrong. I’ve never had to do this before. I’m at odds with myself whether or not to proceed. Will having a loan of this nature (it’s provided by a private student finance company regulated by the FCA) negatively impact upon my already fairly non-existent credit rating, or will it help build it up? I know I can keep up with the payments, that’s not my problem…
It sucks that I’ve gotta pay £2000 more back to them but that’s just the cost of education, I guess. My university doesn’t have any bursaries available, they only do those for first year students and I am going into my final year. I can get no parental support, either.
Thoughts?
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### Author:  [@Colibri](https://boards.straightdope.com/u/Colibri)
#### Post date: [September 9, 2015, 11:48pm UTC](https://boards.straightdope.com/t/i-feel-bad-about-taking-out-a-loan-even-though-i-know-i-can-pay-it-back/730473/2 "2015-09-09T23:48:25Z")
Since the OP is looking for opinions, let’s move this to IMHO.
Colibri
General Questions Moderator
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### Author:  [@Habeed](https://boards.straightdope.com/u/Habeed)
#### Post date: [September 10, 2015, 12:13am UTC](https://boards.straightdope.com/t/i-feel-bad-about-taking-out-a-loan-even-though-i-know-i-can-pay-it-back/730473/3 "2015-09-10T00:13:13Z")
Well, what’s your other option? You drop out and make half the salary you would have made (if that) for the rest of your life? That’s a lot more money you would lose than a couple thousand Euros in interest. I know it sucks, but you don’t actually have a viable other choice.
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### Author:  [@Luke\_James](https://boards.straightdope.com/u/Luke_James)
#### Post date: [September 10, 2015, 12:14am UTC](https://boards.straightdope.com/t/i-feel-bad-about-taking-out-a-loan-even-though-i-know-i-can-pay-it-back/730473/4 "2015-09-10T00:14:31Z")
> [@Habeed](#):
>
> Well, what’s your other option? You drop out and make half the salary you would have made (if that) for the rest of your life? That’s a lot more money you would lose than a couple thousand Euros in interest. I know it sucks, but you don’t actually have a viable other choice.
I don’t drop out, I just struggle and have to work more, it just feels dirty to be taking a loan out… wouldn’t it harm my credit?
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### Author:  [@Chronos](https://boards.straightdope.com/u/Chronos)
#### Post date: [September 10, 2015, 12:18am UTC](https://boards.straightdope.com/t/i-feel-bad-about-taking-out-a-loan-even-though-i-know-i-can-pay-it-back/730473/5 "2015-09-10T00:18:20Z")
Taking a loan out will help your credit rating, not hurt it… as long as you pay it back promptly. I actually had trouble with my credit rating a couple of years ago because I don’t borrow enough money.
That said, 12.5% before you graduate and 10.5% after is a terrible interest rate, especially for a student loan. Shop around to see if you can get a better interest rate elsewhere.
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### Author:  [@Habeed](https://boards.straightdope.com/u/Habeed)
#### Post date: [September 10, 2015, 12:22am UTC](https://boards.straightdope.com/t/i-feel-bad-about-taking-out-a-loan-even-though-i-know-i-can-pay-it-back/730473/6 "2015-09-10T00:22:23Z")
> [@Luke\_James](#):
>
> I don’t drop out, I just struggle and have to work more, it just feels dirty to be taking a loan out… wouldn’t it harm my credit?
Are you likely to earn poorer grades as a result? Are you majoring in a terminal degree now (one that has lucrative, readily available job opportunities) or will you need to compete for a graduate school seat in order to get a degree that’s really worth money? (medical degrees, \*some \*business and law degrees are like that in the states - if you get into the \*right \*school for the latter, you have a high chance of pulling more than 150k soon after graduation. Almost all doctors make that in the states)
If you have to compete for a slot like that, you again don’t have any choice - you can either go into debt or have a lower chance of getting one of a limited number of seats, and if you fail to get a seat, you lose millions across your working career.
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### Author:  [@Chessic\_Sense](https://boards.straightdope.com/u/Chessic_Sense)
#### Post date: [September 10, 2015, 12:23am UTC](https://boards.straightdope.com/t/i-feel-bad-about-taking-out-a-loan-even-though-i-know-i-can-pay-it-back/730473/7 "2015-09-10T00:23:59Z")
Taking about a loan is a fine idea. However, 12%+ APR is absurd. Look around on LendingClub, Prosper, or better yet, SoFi. They’ll probably get you a better deal.
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### Author:  [@The\_Other\_Waldo\_Pepper](https://boards.straightdope.com/u/The_Other_Waldo_Pepper)
#### Post date: [September 10, 2015, 1:00am UTC](https://boards.straightdope.com/t/i-feel-bad-about-taking-out-a-loan-even-though-i-know-i-can-pay-it-back/730473/8 "2015-09-10T01:00:25Z")
> [@Luke\_James](#):
>
> It’s just the thought of taking out a loan, it just feels wrong. I’ve never had to do this before. I’m at odds with myself whether or not to proceed.
"He did help a few people get outta your slums, Mister Potter. And what’s wrong with that? Why – here, you’re all businessmen here. Don’t it make them better citizens? Doesn’t it make them better customers? You, you said that they…
"…what’d you say, just a minute ago? They had to wait, and save their money before they even thought of a decent home. _Wait?_ Wait for _what?!_ Until their children grow up, and leave them? Until they’re so old, and broken down, that – you know how long it takes a workin’ man to save five thousand dollars? Just remember this, Mister Potter, that this _rabble_ you’re talking about, they do most of the working and paying and living and dying in this community. Well, is it too much to have them work and pay and live and die in a couple of decent rooms and a bath?
“Anyway, my father didn’t think so. People were human beings to him…”
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### Author:  [@Colophon](https://boards.straightdope.com/u/Colophon)
#### Post date: [September 10, 2015, 6:02pm UTC](https://boards.straightdope.com/t/i-feel-bad-about-taking-out-a-loan-even-though-i-know-i-can-pay-it-back/730473/9 "2015-09-10T18:02:13Z")
> [@Luke\_James](#):
>
> I don’t drop out, I just struggle and have to work more, it just feels dirty to be taking a loan out… wouldn’t it harm my credit?
I’m curious why you think taking out a loan would harm your credit rating?You say you’re going to pay it back - well, lenders love people who take loans and then pay them back.
Having said that, repaying such a small sum over NINE YEARS is absurd, especially at such a high interest rate. Make sure that whichever loan you end up getting will allow you to settle early, because once you graduate and have a decent job, you won’t be wanting to pay back tiny monthly amounts for years and racking up interest, you’ll just want to pay it off.
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### Author:  [@elfkin477](https://boards.straightdope.com/u/elfkin477)
#### Post date: [September 10, 2015, 6:50pm UTC](https://boards.straightdope.com/t/i-feel-bad-about-taking-out-a-loan-even-though-i-know-i-can-pay-it-back/730473/10 "2015-09-10T18:50:52Z")
> [@Chessic\_Sense](#):
>
> Taking about a loan is a fine idea. However, 12%+ APR is absurd. Look around on LendingClub, Prosper, or better yet, SoFi. They’ll probably get you a better deal.
Yeah. What kind of loan is this? I’m assuming a private bank loan. My federal student loan has as 4.67% interest rate here in the US. What’s it like where you are - does the government involve themselves in lending money to students? If so maybe you can get a more reasonable rate.
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### Author:  [@Luke\_James](https://boards.straightdope.com/u/Luke_James)
#### Post date: [September 10, 2015, 8:30pm UTC](https://boards.straightdope.com/t/i-feel-bad-about-taking-out-a-loan-even-though-i-know-i-can-pay-it-back/730473/11 "2015-09-10T20:30:57Z")
> [@Colophon](#):
>
> I’m curious why you think taking out a loan would harm your credit rating?You say you’re going to pay it back - well, lenders love people who take loans and then pay them back.
>
> Having said that, repaying such a small sum over NINE YEARS is absurd, especially at such a high interest rate. Make sure that whichever loan you end up getting will allow you to settle early, because once you graduate and have a decent job, you won’t be wanting to pay back tiny monthly amounts for years and racking up interest, you’ll just want to pay it off.
You can pay back early, I don’t see this loan being dragged out for very long at all (if I am still paying it back in 8 years time then I have gone very wrong somewhere in my life.)
I was thinking in terms of future potential lenders (i.e. when looking for a mortgage) may be put off by outstanding debts.
> [@elfkin477](#):
>
> Yeah. What kind of loan is this? I’m assuming a private bank loan. My federal student loan has as 4.67% interest rate here in the US. What’s it like where you are - does the government involve themselves in lending money to students? If so maybe you can get a more reasonable rate.
I have student loans from the government, they cover my tuition and I get £2300 every 4 months towards the cost of living, but once my rent is paid and I have bought my books, study materials etc. I have very little left to live on.
I have held down jobs before, but I am in my final year and I cannot concentrate so much of my time on part-time work.
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### Author:  [@msmith537](https://boards.straightdope.com/u/msmith537)
#### Post date: [September 10, 2015, 9:21pm UTC](https://boards.straightdope.com/t/i-feel-bad-about-taking-out-a-loan-even-though-i-know-i-can-pay-it-back/730473/12 "2015-09-10T21:21:21Z")
> [@Luke\_James](#):
>
> I don’t drop out, I just struggle and have to work more, it just feels dirty to be taking a loan out… wouldn’t it harm my credit?
That’s sort of a weird attitude.
1. You are SUPPOSED to pay back a loan eventually. It’s not a handout.
2. Debt helps your credit score by establishing a credit history (just may sure you make the payments on time)
3. The whole purpose of debt is to provide financing for something you want now in exchange for paying a higher price (in the form of interest) over a longer period of time. i.e. a 30 year mortgage lets you live in the house now instead of having to save up (while paying rent) until you’re 60.
4. You can generally pay off the loan all at once if you’re financial situation justifies it.
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### Author:  [@Quartz](https://boards.straightdope.com/u/Quartz)
#### Post date: [September 10, 2015, 10:23pm UTC](https://boards.straightdope.com/t/i-feel-bad-about-taking-out-a-loan-even-though-i-know-i-can-pay-it-back/730473/13 "2015-09-10T22:23:31Z")
> [@Luke\_James](#):
>
> I am considering taking out a £2,500 loan at a fixed interest rate of 12.5% before I graduate, and 10.5% after I graduate.
That’s a very high rate of interest indeed. I find it difficult to believe that you cannot get a far better rate from a bank or building society. You’re a student, so this should come under [student loans](http://www.slc.co.uk/).
Failing that, the DWP may be able to offer you a loan.
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### Author:  [@Luke\_James](https://boards.straightdope.com/u/Luke_James)
#### Post date: [September 11, 2015, 2:00am UTC](https://boards.straightdope.com/t/i-feel-bad-about-taking-out-a-loan-even-though-i-know-i-can-pay-it-back/730473/14 "2015-09-11T02:00:43Z")
> [@Quartz](#):
>
> That’s a very high rate of interest indeed. I find it difficult to believe that you cannot get a far better rate from a bank or building society. You’re a student, so this should come under [student loans](http://www.slc.co.uk/).
>
> Failing that, the DWP may be able to offer you a loan.
The interest is high, however I don’t believe I’ll be paying it back for the full ten years. No banks will lend to students (the likes of Lloyds & Halifax, for example, rule anyone out who is in full-time education.)
DWP will only help you if you’re on benefits.
I get the full government student loan, but it is simply not enough (I get no support from my family, or any sort of bursary/grant from uni.)
The interest on the loan is 12.5% until I graduate (in June) and then 10% per year thereon. So, if I repay within 3/4 years (I hope to be salaried by then) I will not be paying back a huge amount on top of the £2,500.
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### Author:  [@msmith537](https://boards.straightdope.com/u/msmith537)
#### Post date: [September 11, 2015, 3:59am UTC](https://boards.straightdope.com/t/i-feel-bad-about-taking-out-a-loan-even-though-i-know-i-can-pay-it-back/730473/15 "2015-09-11T03:59:35Z")
> [@Quartz](#):
>
> That’s a very high rate of interest indeed. I find it difficult to believe that you cannot get a far better rate from a bank or building society. You’re a student, so this should come under [student loans](http://www.slc.co.uk/).
>
> Failing that, the DWP may be able to offer you a loan.
Yeah, that’s like credit card interest rates.
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### Author:  [@SanVito](https://boards.straightdope.com/u/SanVito)
#### Post date: [September 11, 2015, 8:18am UTC](https://boards.straightdope.com/t/i-feel-bad-about-taking-out-a-loan-even-though-i-know-i-can-pay-it-back/730473/16 "2015-09-11T08:18:37Z")
> [@Luke\_James](#):
>
> The interest is high, however I don’t believe I’ll be paying it back for the full ten years. No banks will lend to students (the likes of Lloyds & Halifax, for example, rule anyone out who is in full-time education.)
>
> DWP will only help you if you’re on benefits.
>
> I get the full government student loan, but it is simply not enough (I get no support from my family, or any sort of bursary/grant from uni.)
>
> The interest on the loan is 12.5% until I graduate (in June) and then 10% per year thereon. So, if I repay within 3/4 years (I hope to be salaried by then) I will not be paying back a huge amount on top of the £2,500.
If that’s the best rate you can get as a student, then your better option would be to take this loan now, then when you get a full time job, get a loan with a better rate and pay this bad loan off. You can get bank loans at c.3.5% at the moment.
This way, you will get end of paying much less, plus, as you are earning, you will be able to pay higher amounts to clear the loan faster.
Check the fine detail on the loan you are looking to take out now to make sure there are no penalties for paying the loan off early.
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### Author:  [@Luke\_James](https://boards.straightdope.com/u/Luke_James)
#### Post date: [September 11, 2015, 11:16am UTC](https://boards.straightdope.com/t/i-feel-bad-about-taking-out-a-loan-even-though-i-know-i-can-pay-it-back/730473/17 "2015-09-11T11:16:56Z")
> [@SanVito](#):
>
> If that’s the best rate you can get as a student, then your better option would be to take this loan now, then when you get a full time job, get a loan with a better rate and pay this bad loan off. You can get bank loans at c.3.5% at the moment.
>
> This way, you will get end of paying much less, plus, as you are earning, you will be able to pay higher amounts to clear the loan faster.
>
> Check the fine detail on the loan you are looking to take out now to make sure there are no penalties for paying the loan off early.
I’ve read the agreement, there are no penalties. You can pay back in lump sums, the only variance being if you wish to pay off the loan in full you have to give notice.