Debt and borrowing

Debt is something, usually money, which is borrowed and is expected to be paid back. As a student, there may be times when borrowing money may become necessary, however borrowing more than you can afford to pay back can spiral and lead to stressful and potentially long-term consequences.

Managing debt means making sure you stick to the plan for paying it back on time. If you don't, this could lead to your debts becoming unaffordable as interest is often then added to your balance of debts.

Understanding the different types of debt can help you make informed decisions about borrowing money and managing your finances responsibly.

Credit cards

Credit cards can be convenient for making purchases and building a credit history.

For purchases over £100, the use of a credit card can offer additional protection under Section 75 of the Consumer Credit Act which means that the credit card company has equal liability with the seller if there is a problem with the thing that you have purchased.

Credit Cards are covered by the Consumer Credit Act (CCA). This means there are strict rules that creditors must follow if you’re struggling to pay your credit card bills.

Additional charges can be attached to things like withdrawing money and using your card abroad. To avoid interest spiralling out of control, pay your bill off in full each month.


An overdraft is when the bank lets you spend more money than you have, up to a pre-agreed amount. This is often referred to as an arranged overdraft or authorised overdraft. An unarranged overdraft is when you exceed the pre-arranged amount that has been agreed by the bank. The bank will often charge you a daily rate for being in your unarranged overdraft until the unarranged overdraft is repaid.

The benefit of an arranged overdraft is that it will normally be interest free, however it should be kept sensibly for emergencies rather than viewed as free cash.   

Buy Now, Pay Later

Buy Now, Pay Later is a way of making purchases and spreading the repayments for these purchases over several weeks or months. Instead of you paying the retailer for goods or services either in store or online, you enter into an agreement with your BNPL provider to make payments to them and they will pay the retailer on your behalf.

This method of borrowing is becoming increasingly prevalent. We have produced a helpful guide to navigate through the pros and cons of this type of debt.

Download our Navigating the Buy Now, Pay Later Landscape Safely pamphlet (Word doc, 1MB).

Payday loans

Payday loans are often thought of as a quick and easy way to access cash, but they can be an extremely expensive way to borrow money. Many people take out a payday loan because they struggle to get credit elsewhere. While payday loans can provide immediate relief, they often trap borrowers in a cycle of debt due to their high costs and short repayment terms. If you need to take out credit you should consider your alternatives.

Personal loans

When you take out a personal loan, you borrow a fixed amount from a bank or creditor. You repay in fixed amounts over an agreed number of months or years. These loans will either be unsecured which is the most common for small loan values, or secured, which means the loan will be secured against something valuable such as a car or a house. The latter has the potential for you to lose ownership of the item you have secured against if you are unable to make repayments.

Personal loans will nearly always charge interest and potentially include arrangements fees and possible late payment fees.

As these loans tend to be for a greater amounts than payday loans, the application process will often include credit checks, income and employment verification and debt to income ratio checks. This therefore makes this form of credit more difficult to secure for students.

Debts to other people

Borrowing money from family and friends may be a cheaper and easier alternative to a short term or longer-term loan, however getting into debt with someone close to you can be complicated and difficult if you are no longer able to afford to repay the debt.

If you are thinking about borrowing money from a friend, make sure that you can afford the repayments. You should talk about what might happen if you cannot afford to pay it back, and whether this would affect your relationship. Sometimes the possible strain on your relationship might not be worth it.

Student loans

These loans are available to students in Scotland, England, Wales, and Northern Ireland to provide financial assistance to cover the costs of higher education, including tuition fees (where applicable) and living expenses. The amount you can borrow varies dependant on many factors.

These loans typically have low-interest rates compared to personal loans.

Repayment of these loans will not begin until after you have graduated from your course and you are earning above an income threshold, which is reviewed annually.

Find out more about undergraduate funding and postgraduate fees and funding.

Avoid getting into debt

The best way to deal with debt is to avoid getting into it in the first place. A great place to start is reviewing your spending levels and habits and determining what positive changes you can make. Look at our Your Spending Review guide to see how you can get the most out of your money.

Once you have identified the areas where you spend your money, you can look at preparing a budget. 

This can be done through working on a budget that is realistic, and you can stick to. You can try our own budget calculator or find one online at

You can read more about the key to effective budgeting in our Guide to creating your budget (Word doc, 3MB).

Do you have a debt problem?

You do not need to owe thousands of pounds to start feeling the pressures of debt. But when should you do something about your debt, and how do you know if it is a problem?

Everyone has their own tolerance for managing debt, but there are key warning signs to watch out for and avoid:

  • You regularly use a credit card or overdraft to cover daily costs like food shopping or petrol.
  • You're late paying bills or making repayments.
  • You're worried about money – debt can have a huge impact on mental and even your physical health.
  • You're juggling multiple debts on a low income.
  • You hide or avoid looking at bank statements, receipts and bills.
  • You've had warnings or payment demands from a lender/s or a legal organisation.

If any of this rings true, then the best thing to do is to face up to the situation, seek help and take back control.

Dealing with debt – take control

Dealing with the repayment of debt can feel overwhelming at times. It is important however not to ignore the warning signs that debt is getting out of control. Identifying that you have a debt problem can seem overwhelming, but a structured approach and commitment can help manage the problem.

We have produced a guide, Dealing with debt (Word doc, 2.39MB) to help you address your debt problems.