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megatron7

New to Borrowing Money - HELP

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Hi,

 

My undergraduate degree was paid for by my grandparents who put money away for me as I was growing up, so I don't really know how to go about paying for law school.

 

I have a small sum saved up from working fulltime, but it won't nearly be enough to cover tuition, living expenses, text books, ect. I will be attending TRU in the fall.

 

My question is - where do I start?

I've noted when I am able to apply for some scholarships/burseries with TRU, and I've also noted when I can apply for a student loan with the Alberta government.

 

Should I be going the student loan route, or should I be going with a student line of credit with a bank, or should I be doing both?

 

Thank you :)

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I'm in a similar boat.. Wondering if I should apply for a loan through gov or line of credit from the bank!

Hopefully finances worked out for you girl. :)

 

If you have (or anybody has) any advice please feel free to PM me! I'm also an east coaster, so anyone with NB or NL loan advice could prove super helpful!

 

Thank you kindly :)

 


 

 

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Many (most?) people who take out loans will use both government student loans and bank lines of credit. Interest paid on government loans is tax deductible but most bank lines of credit have lower interest rates and some don't require any payments until after you graduate or even after you finish articling. I think it's important to apply for government student loans though to become eligible for some non-repayable grants (ie. free money).

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I live in Ontario, so some of my comments (especially re: grants)  may not apply to those in other jurisdictions.

 

Like many people, I have both. IMO there's no reason not to apply for government assistance given that some of it may be grant money, depending on your situation, and the rest of it is repayable on generous terms with the government covering interest until you graduate. To add to what wakawaka said, applying for government financial aid may be a prerequisite for receiving non-government grants as well (such as university bursaries).

 

Student lines of credit are also very useful, but should really only be used if you've exhausted your other sources of funding (savings, government assistance, bursaries, etc.). Although rates are fairly low, you normally still have to pay interest on the debt while you're in school and, although repayment is usually deferred for a period of time after you graduate, the terms are not as flexible as those you get with the government (in my case, it's 1% of the remaining debt plus interest. With $80,000 @ 3.5% annual interest, that's over $1000/mo. at the beginning).

 

The most attractive thing about the LOC, though, is the flexibility. You can draw from it just as easily as you can pay back into it, which makes it ideal for emergency situations (and, of course, you have both the option and incentive to pay back as soon as possible).

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Hi Erchnut,

 

As Mountebank and others have suggested there really is no reason for you not to apply for government funding if you need funding of any sort. Not only can some of it be grant money which you will not have to repay, but the money you borrow there is interest-free while you are in school and depending on the Province can remain so even after you are done. Even once you are done school and begin articling and working, you can then apply for repayment assistance depending on your income at that time.

 

Repayment assistance can help by forgiving/reducing some of the payment each month if you qualify for it, and to my knowledge you don't have to repay that. Again this may be dependent on your Province and if you qualify for it at that time.

 

You should also consider applying for a professional student line of credit at a bank. There are a couple of reasons for this - one may be that you may not get enough in government funding, and the second reason is that it can be used to consolidate government loans once you are done school. Government loans begin to accrue interest the day you are finished school, and these interest rate could be higher than what you would get  through a bank. For instance, the federal portion of any government student loan has a rate of Prime + 2.5%, where you can get your professional student line of credit at Prime or Prime + 0.5%. Having the lower interest rate on the line of credit would get you a lower cost of borrowing at the end of the day.

 

As someone mentioned, you can claim interest paid on government student loans on your taxes at the end of the year, but not on a line of credit at a bank. With that being said, it is still better using a bank line of credit if the interest rate is substantially lower. Last I checked you would get 17% back on the interest paid on a government student loan, which isn't that much compared to the potential savings by having a lower interest rate. For instance, let's compare the federal student loan rate and the savings associated with that on borrowing $1000:

 

Federal Rate: Prime + 2.5% = 5.2%

Annual Interest Paid on $1,000:  $52

Income Tax Savings (17%):  $8.84

Net Cost: $43.16

 

Bank LOC: Prime + 0.5% = 3.2%

Annual Interest Paid on $1,000:  $32

Net Cost: $32

 

As you can see your net cost is lower using a bank LOC, so it would make sense to switch the balance owing on the federal portion to the line of credit. You can use the same calculation for the Provincial portion of your loan to see if it would be also worth it to consolidate that. The only instances where I would suggest not consolidating government student loans would be if the interest rate on the government loans was pretty much equal to or lower than the bank line of credit, or if there is any opportunity for any debt forgiveness or repayment assistance on those loans. You should always check if those options are available to you first.

 

Hope that helps!

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Great info, Scotiabank.

 

I have yet to really dive into researching (that'll be in the new year), but this was a good starting point for tips. Nice to know a few questions to ask so as to not wander into my bank totally obliviously asking for moneyz.

 

Thanks for your help!!

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Hey, I wonder do you apply first for a student loan or first for the line of credit? If I am approved for a line of credit would that reduce the amount I will be eligible for from a governmental loan?

Thanks

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LOC has no impact on student loan/grant. You can apply both as soon as you can.

 

You don't pay any interest on the LOC until you start drawing on it. Interest will be added to your outstanding balance.

 

e.g. You took out $10,000 last month then your loan balance will be $10,100 ($100 interest assumed)this month.

 

You need to show the bank your enrollment confirmation before your can take the money out.

 

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Hey, I wonder do you apply first for a student loan or first for the line of credit? If I am approved for a line of credit would that reduce the amount I will be eligible for from a governmental loan?

Thanks

 

Generally, you want to apply for the LOC first because it should not have any impact on your gov't student loan application since it's money you have to pay back and can't be considered savings or an asset... whereas, depending on what province you're in and what bank you're looking at for your LOC, the bank could reduce your LOC amount based on your student loan amount if you get the loan secured first. If you're concerned about this happening, best thing to do is just make an appointment at the bank and find out first hand if this will be the case.

Good luck!

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Generally, you want to apply for the LOC first because it should not have any impact on your gov't student loan application since it's money you have to pay back and can't be considered savings or an asset... whereas, depending on what province you're in and what bank you're looking at for your LOC, the bank could reduce your LOC amount based on your student loan amount if you get the loan secured first. If you're concerned about this happening, best thing to do is just make an appointment at the bank and find out first hand if this will be the case.

Good luck!

Thank you. That makes sense!

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About how long does it take to to be approved for both a line of credit and student loans? How early is it recommended to apply?

 

For me, it unfortunately took weeks (maybe months) to get my loc approved. It involved explaining things on my credit report and also getting a co-signer (which not everyone needs to do). However, for others, it may only take days.

 

Because I was sort of the worst case scenario, I would recommend applying for the loc as soon as you have the required documents in place. My bank only required proof that I had been accepted into law school and not proof of registration (which comes much later). So I had my loc in place around the same time student loan applications opened online. Once the loc was approved, I then applied immediately for student loans. The online application gave an estimate of my approved loan amount and maybe 2 or 3 weeks later, I got the official letter confirming the estimated amount. I applied very early because I wanted to make sure I knew exactly how much money I was going to have access to as soon as possible so that I could make alternate plans if I didn't get enough funds.

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About how long does it take to to be approved for both a line of credit and student loans? How early is it recommended to apply?

I can tell you that I usually get applications approved within 24-48 hours, the application process is pretty quick and uncomplicated with us. I recommend to apply as soon as possible, the sooner it's done the sooner you won't need to worry about it anymore. Issues can arise if you wait to apply - missing out on funding for previous years (if you apply in second or third year), government student debt getting to a point where it will affect the amount approved, unforeseen circumstances which may take a little longer to deal with, etc.

 

Getting the application done and approved also doesn't mean you are committing to anything, you can always cancel the application or decide not to go with it in the end.

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For me, it unfortunately took weeks (maybe months) to get my loc approved. It involved explaining things on my credit report and also getting a co-signer (which not everyone needs to do). However, for others, it may only take days.

 

Because I was sort of the worst case scenario, I would recommend applying for the loc as soon as you have the required documents in place. My bank only required proof that I had been accepted into law school and not proof of registration (which comes much later). So I had my loc in place around the same time student loan applications opened online. Once the loc was approved, I then applied immediately for student loans. The online application gave an estimate of my approved loan amount and maybe 2 or 3 weeks later, I got the official letter confirming the estimated amount. I applied very early because I wanted to make sure I knew exactly how much money I was going to have access to as soon as possible so that I could make alternate plans if I didn't get enough funds.

I'll definitely aim to apply as soon as possible. Thanks!

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I can tell you that I usually get applications approved within 24-48 hours, the application process is pretty quick and uncomplicated with us. I recommend to apply as soon as possible, the sooner it's done the sooner you won't need to worry about it anymore. Issues can arise if you wait to apply - missing out on funding for previous years (if you apply in second or third year), government student debt getting to a point where it will affect the amount approved, unforeseen circumstances which may take a little longer to deal with, etc.

 

Getting the application done and approved also doesn't mean you are committing to anything, you can always cancel the application or decide not to go with it in the end.

Thanks you for your reply! I'm not currently with Scotiabank. If I choose to go with the Scotia plan, will I need to cancel my accounts at my current bank before getting approved, or do I only have to cancel them after I am approved and would like to accept?

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Thanks you for your reply! I'm not currently with Scotiabank. If I choose to go with the Scotia plan, will I need to cancel my accounts at my current bank before getting approved, or do I only have to cancel them after I am approved and would like to accept?

 

I've just been approved for my Scotia PSLOC and I've done all my banking with TD. If/When approved, they will ask you to close credit cards from outside sources and take theirs instead. You can choose to keep your OFI credit cards, but it will reduce your PSLOC amount (for example if you have a 5,000 Visa with TD, you would not be able to get the full $100,000 PSLOC but rather $95,000 as this amount would be deducted), since Scotia's professional student plan is great and they offer their own credit cards worth $10,000 which does not impact your PSLOC limit, closing the card with TD is not an issue to me. 

 

If you have a chequing/savings account with another bank, that does not (to my knowledge), have any impact on your professional student plan with Scotia, the main concern is liabilities like existing credit products (credit cards, lines of credit etc.). 

 

Anyways, you would be able to apply in your current status- feel free to PM me if you have any questions, I've just gone through the process myself. 

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I've just been approved for my Scotia PSLOC and I've done all my banking with TD. If/When approved, they will ask you to close credit cards from outside sources and take theirs instead. You can choose to keep your OFI credit cards, but it will reduce your PSLOC amount (for example if you have a 5,000 Visa with TD, you would not be able to get the full $100,000 PSLOC but rather $95,000 as this amount would be deducted), since Scotia's professional student plan is great and they offer their own credit cards worth $10,000 which does not impact your PSLOC limit, closing the card with TD is not an issue to me. 

 

If you have a chequing/savings account with another bank, that does not (to my knowledge), have any impact on your professional student plan with Scotia, the main concern is liabilities like existing credit products (credit cards, lines of credit etc.). 

 

Anyways, you would be able to apply in your current status- feel free to PM me if you have any questions, I've just gone through the process myself. 

Just curious, at what date are you able to access the funds?

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Just curious, at what date are you able to access the funds?

 

I have not yet received a date, I know there's a few things that still need to happen. But from my knowledge regarding lines of credit, there would be a signing that would need to be completed, so a Scotia branch would have to be coordinated first. Beyond that, I'm not overly concerned as it is quite early. 

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