Forward planning for private education commitments is not always possible. Parents who had not originally intended to send their children to an independent school may find themselves, for reasons beyond their control, in a position where an independent education is necessary.
On such occasions, where fees are due immediately and no provision has been made it may be possible to arrange loan facilities on a “draw-down” basis (subject of course to status and where appropriate, valuation of property).
This type of facility provides a flexible cash reserve which can be used to pay all or part of the fees as they fall due each term. Monies may be drawn down as and when required and interest is only payable on the amount actually borrowed.
The interest rates applicable are highly competitive and can be a mixture of variable, fixed, discounted and capped.
More and more lenders are now offering this type of loan facility and the products themselves are becoming more “user friendly” i.e. interest is charged on a daily basis, monies borrowed may be repaid and borrowed again at a later date and a card is often provided for ease of withdrawal.
These loan facilities are usually secured on residential property. If for any reason it is not possible (due to insufficient equity, for example, early redemption penalties on the existing mortgage, or the parent does not want to use the house as security) then there are “personal” loans available.
These are more expensive (an interest rate of 5.5 per cent above base rate) and the maximum level of borrowing is £25,000, but they can provide a reassuring safety net.
The underlying secret is to spread the high cost of private education over a longer term and thus pay for it out of income.
It is never too late to begin school fees planning but the sooner you start the better. If you would like us to advise on your specific situation and prepare a report on your estimated liabilities then please contact us with details of your children’s names, dates of birth, and the schools you intend to send them to.