Investing in a higher education, postgraduate, master’s or doctoral degree can significantly improve your professional and financial life. However, this type of investment is not available to everyone, at least through equity. In Portugal, there are many people who do not have the financial capacity to bear the costs of academic training. And if this is your case and you are determined to continue your studies, know that there is a personal credit that can help you achieve this goal: the credit for students. Student credit, as a rule, allows you to obtain financing with better conditions, when compared to other personal credits. This is because in this type of credit, the interest rates tend to be lower and there is the possibility of benefit from a grace period until you finish your studies. But before deciding whether or not student credit is the right option to achieve this goal, it is first essential that you know all the conditions of this financing. And to help you in this analysis, below, we explain how credit training works, under what circumstances you can apply for it, and what conditions you need to fulfill. Also read: Personal credit: What does it take to have the loan approved?
What distinguishes student credit from other personal credits?
If you need to use a credit to support the costs of your training, consider using a personal credit to achieve that goal. However, think carefully about the type of personal credit you are going to apply for. This is because the conditions you will get on a personal loan without a specific purpose are less attractive than using a student loan.According to data published by Banco de Portugal, in the third quarter of 2022, financial entities cannot apply a APR greater than:6.6%: In personal loans with purpose of education, healthrenewable energy and equipment leasing;13%: On other personal loans (no specific purpose, home, consolidated and other purposes). note: Please note that for the 3rd quarter of 2022, a maximum APR to financing through credit cards, lines of credit, bank current accounts and overdraft facilities of 15.9%. So, pay attention to interest rates if your only solution is to take out a loan to continue studying. However, be aware that student credit has some factors to take into account and the Conditions vary widely from bank to bank.
Options available in the student loan market
When you want to get a credit to pay for your training, you should know that there are Two types of student credit:Personal credit for the purpose of education: Having several designations in the market, such as personal credit for students, credit for training, among others.Credit for higher education students with mutual guarantee: This is a line of credit where the State is the guarantor of the loan. Although the conditions are more attractive in this type of financing, there are few entities that offer this option. To better understand the conditions in each of these options, we present the general conditions applied to this type of financing. a personal credit
Personal credit for the purpose of education
In Portugal there are several financial institutions where you can take out a personal loan for the purpose of education. But financing conditions will vary greatly from bank to bank. To give you an idea, it is possible to obtain a credit for students of 1,000 up to 50,000 euros. In terms of maturity, this type of credit can have a term of 2 to 10 years. However, one of the positive points for those who are still studying and do not have the financial capacity to bear significant costs is that this type of credit, as a rule, offers a grace period while studying. That is, there is the possibility of paying only the interest on your loan until you finish your studies. As a general rule, the grace period is up to 4 years. But there are financial institutions where the grace period is shorter. You need to look closely at the conditions. As for interest rates, these will also vary depending on the bank. You can find entities that practice a APR from 4.1% to 6.6%. In this aspect, you should take into account that there are entities that offer a lower APR, as the interest rate is indexed to Euribor. Credits that have a higher APR, as a rule, have a fixed rate associated with the contract, being the most common at 5 years.already in relation to commissions, this type of financing usually exempt customers from this type of charge. However, always confirm that there are associated commissions. In terms of insurance, there may or may not be an obligation to subscribe to a credit life insurance. There are banks that this subscription is optional, but when the credit maturity is greater, this contracting may be required. Finally, credit for students allows you to finance up to 100% of the amount you need to pay for your studies. But be aware that you will have to present expense receipts.
Credit for higher education students with mutual guarantee
Have you ever heard of the line of credit for higher education students with mutual guarantee? This is a line of credit that relies on the State as guarantor, and allows since 2007 to finance academic expenses, such as higher professional technical courses, degrees, masters or doctorates. However, in 2015 it was suspended after budget cuts and returned to activity at the end of 2018. Although there are few banks selling this type of credit, it could be an advantageous option, as requires fewer guarantees and presents attractive conditions compared to other solutions on the market. In practice, credit for students with mutual guarantee allows financing that varies between 1,000 and 5,000 euros per year of course. However, the total value cannot exceed 30,000 euros. As a general rule, this line of credit offers a period for making capital available from 1 to 6 years, and the deadline cannot exceed the duration or the time left for the end of the course. Already capital amortization, this has a term of between 6 and 10 years. However, most banks set the deadline for twice the duration of the course, but counting starts after the period of use. A relevant point compared to other student credits is that the credit for higher education students with mutual guarantee only offers, optionally, the capital grace period of 2 years. In terms of availability, there is the possibility of being carried out in monthly, quarterly, semiannual or annual tranches. But the most common option is monthly tranches. As for interest rates, a fixed fee compounded by the taxthe Euribor swap, according to the term corresponds to the term of the operation, plus a maximum spread of 1.25%. Students who prove that they are benefiting from a scholarship, can see their spread reduced by 0.25%. In addition, in this line of credit no dossier or early repayment fees may be charged. However, after the first year, the allocation of money is subject to the student’s achievement. In other words, the student will have to submit evidence issued by the educational establishment of his/her success.
What documents and requirements are needed?
Depending on the type of student credit, different documents and requirements may be requireds. For example, credit for higher education students with mutual guarantee supposedly requires fewer guarantees, as the State is the guarantor. Therefore, there are documents that are required for a candidate to be eligible such as:enrollment certificate in the professional higher technical course, degree, master’s or other equivalent training; Signed declaration in which the candidate assumes the commitment to continue their studies and to have the proper use during the term of the financing agreement;certificate of non-debt, both Social Security and the Tax Authority. You can obtain this declaration from the Direct Social Security Service and from the Finance Portal. However, it is important to note that these documents will only prove that a candidate is eligible for this type of funding. But the final word always belongs to the bank that grants this loan.. Most banks that provide student loans require the following: requirements and documents:Being of legal age, that is, having over 18 years old;Present proof of enrollment at a public or private university; responsibility map taken from the Banco de Portugal website, thus proving that it is not on the BdP’s blacklist. Identification documents of the contract holders; Proof of nominative IBAN of one of the contract holders;Last salary receipt of the holder; The last tax return or delivery validation code;proof of address or residence; Or other documents that may be required, according to the specific situation in which the holder finds himself.
What to consider before applying for a student loan?
If you are thinking of using a student loan to continue your studies, remember that, as with any financing, this is a decision that must be carefully considered. So, think carefully about the weight that this charge will have on your budget in the initial phase, but also when the grace period ends.In addition, before contracting this type of credit, compare multiple offers, take a good look at the interest rates, APR and MTIC, because you will have an idea of the total cost of this financing. Finally, be aware of associated products or the value of mandatory insurance in some entities for the granting of this loanlike the credit life insurance.Do the math, take a good look at your family budget, and see if in the short, medium and long term you can support this expense. Don’t forget that over the years, your expenses will probably increase. And if the grace period is four years, you will have to pay a significant benefit once you finish your studies. then try create savings that help you pay off the amount owed, without putting your budget at risk.Also read: The questions you should ask before taking out a personal loan