Money: Managing Your Money Options for Funding Your Education
By Bill Knight
Bill Knight is the Commissioner of the Financial Consumer Agency of Canada (FCAC). He lives and works in Ottawa.
Education can be expensive and not everyone has the money to invest in a university degree or college diploma. There are options available to help you fund your education. But, before you look for the right funding, you will need to have a bank account with a bank or credit union.
Getting a bank account
As a newcomer to Canada, you have a right to a bank account. Before signing up for an account, shop around for the type of account you need and the types of services you require. Once you have made those decisions, make sure you have proper identification to open an account. For a list of the type of identification required, visit the Consumer Information section at www.settlement.org.
Finding the money that you need
Universities, colleges and the provincial government offer loan programs and grants to help fund your education. These loans, grants, scholarships and bursaries are tailored for students but have eligibility requirements. For details about the programs available to you, contact the financial aid office at your school.
Banks and credit unions can provide you with loans as well. Some loans cost more than others, so compare a number of options before deciding which one is right for your situation. For example, most banks and credit unions offer products aimed directly at students. These include student lines of credit and student credit cards.
If you have not already established a credit history in Canada, the bank may ask for you to have someone co-sign the loan. This means they may want someone with a good credit history and a steady income to secure the loan for you. Once you get the loan, you will have the opportunity to start building your own credit history.
Student credit cards are an option for short-term emergency borrowing. Most student credit cards have a low credit limit of $500 and are generally available to students. While credit cards may be convenient to cover emergency purchases they are not recommended for covering big expenses such as your tuition. Credit card debt is very expensive with interest rates ranging from nine to 28 per cent. If you do get a credit card, make sure you pay off what you owe each month, or at least pay the minimum payment required each month. If you use your credit card responsibly, you will be on your way to establishing a good credit history for yourself.
Building your credit history
As you use credit with banks, credit card companies and other businesses, they send information about your payment record to credit bureaus and this information becomes part of your credit history. This history paints a picture of your past and current financial situation. It contains records of:
- your recent place(s) of residence,
- your employment history,
- your current debts,
- whether you pay your bills on time,
- whether you have been denied a loan by a financial institution in the past and
- your history of bankruptcy, if any.
It is very important to have a good credit history! If you don't, lenders may refuse to give you a loan (such as a car loan or another personal loan). If they do give you a loan, they may charge you a higher interest rate for it. A poor credit history can affect your life in other ways, too.
For example, when you sign a document such as a lease for an apartment, you are likely authorizing the other party to verify your credit history. A poor credit history may prevent you from getting a lease on an apartment.
Repaying your loan
Most loan programs aimed at students do not ask you to repay your loan until you graduate or leave school. Before you sign a loan agreement, ask the loan provider to explain when and how you are expected to repay the loan. It is important to respect all of the deadlines for paying it back.
Use these tips wisely when you are repaying your loan and you will be well on your way to building a good credit history.
- DO always try to pay your bills on time.
- DO contact your creditors if you are having trouble making payments.
- DO make sure your monthly account statement does not contain any errors.
- DO check your monthly statement for changes the lender may make to your loan agreement.
- DO request your credit file from the credit bureaus at least once a year to make sure it does not contain any errors.
- DO deal with companies that you know and trust.
- DON'T accept or use any form of credit until you understand and are comfortable with its terms and conditions. This will avoid misunderstandings between you and the credit issuer.
- DON'T exceed your credit limit on your credit card.
Remember that an investment in education is an investment in yourself. You may have to give up some of the things you enjoy in order to keep your expenses down while you are in school but you will likely be rewarded in the future.