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As education costs continue to climb, sometimes the only way to keep up is to borrow money. Be it for yourself, your spouse or your children, there are a number of solutions including government loans, lines of credit or borrowing against real estate. These options are designed to help students of all ages. When used wisely, borrowing for education can be a sensible decision. However, if abused, debt can be a source of additional stress, so using financing for education requires discipline.

Advanced Private Lending is able to offer financing on a secured basis. For example, if you have a home, cottage or investment property which can be used as security, APL can often use the equity in these properties in order to finance your education. Included below is some additional information you will find useful.

Determining how much to borrow

The first step in applying for a loan or mortgage is formulating a detailed budget. First, estimate how much the upcoming school year is going to cost you. Tuition, books, transportation, accommodation, and any miscellaneous costs should all be included.

Next, determine how much money you have saved and how much you expect to earn during the school year.

If you haven’t saved enough to cover these costs, you may need to borrow.

Before you borrow, think about how you’ll pay off the loan. Are the terms reasonable? Can you afford the monthly payments? If not, you may need to reduce your costs, look for alternative ways to finance your education, or consider attending school part-time or after you have saved more.

Borrowing options

In most cases, government student loans are your best bet. You are not required to make principal or interest payments until your schooling is finished, so they are easy on your budget. In addition, if you are struggling to pay back the loan, it may be possible to get some of the outstanding balance waived.

If you don’t qualify for a government loan or line of credit, but have equity in real property, a mortgage might be a suitable option.

Another option available to you is the ability to borrow from your or your spouse’s RRSP, using the Lifelong Learning Plan (LLP). Unlike normal RRSP withdrawals that are taxed as income in the year of withdrawal, LLP withdrawals are not immediately taxed. If you repay them to your RRSP within the allowed time, the LLP withdrawals are not added to your income.

The benefits of credit

A credit card is another possibility. However, credit card interest rates on unpaid balances are very high. If you do choose to use a credit card, try to do so sparingly, and pay it off in full every month.

Used responsibly, a credit card can improve your credit rating, and make you a better candidate for future loans. The best way to show lenders that you deserve to be granted credit is to be responsible with credit you already have. Below are some tips to help you handle your credit responsibly.

  • limit how many credit cards, loans and lines of credit you apply for and use (to keep your credit rating high)
  • always pay your bills on time - the minimum payment, if not more
  • borrow only what you can repay  - remember, you're spending your future income, so limiting what you spend now means more financial flexibility later
  • work out a budget and banking routines to help control your spending
  • if you get an unexpected windfall, try using at least part of it to repay some of your debt

If you have no previous credit history, you may find it beneficial to inquire about a secured credit card. Many banks offer these as an option for those just starting to build a credit profile. Your credit card balance is secured by a deposit you make in advance. Once you establish a pattern of making any required payments on time and stay below the credit limit, it may become easier to acquire a credit card or line of credit in the future.