Education loan: How to invest in your children’s future without getting into financial trouble?

Every parent wants to provide their child with the best possible starting point in life, one that will allow them to fulfill themselves and open doors to a promising future. One of the ways to do this is by funding their education.

This is an investment that in many cases proves itself: According to data published by the Ministry of Education in 2023, the average salary of a person with a bachelor’s degree is 57% higher than the average salary of someone with only a high school education. A person with a master’s degree will earn, on average, more than twice as much as someone with a high school education. And what about those with a high school education who completed professional training? They earn an average of 17% more than those with only a high school education.

Investing in your children’s future can have far-reaching effects, but the high costs make it unattainable for many parents: From funding matriculation exam prep courses and psychometric test courses to professional training and academic degrees – education costs can add up to amounts that are difficult to bear, especially in an era when the cost of living continues to rise.

There are several ways to bridge the gap between education costs and your available funds: Searching for scholarships and grants, using the personal deposit for discharged soldiers, receiving assistance from the educational institution or your employer, and more. But what can you do when even these options don’t close the financial gap? Here, a decision to take a general-purpose loan may come into play. To ensure your children’s future without losing financial balance, it’s important to check several key factors when taking out a loan.

An important step before taking a loan is checking whether you’ll be able to meet the monthly repayments. A monthly repayment that pushes you into overdraft or increases it every month can lead to a slippery slope of expensive loans that worsen your financial situation.

Therefore, the first step is to understand your disposable income (net income minus fixed expenses) and ensure it’s higher than the expected monthly repayment. As a rule of thumb, it’s recommended that the loan repayment not exceed 30% of your monthly disposable income. Is the monthly payment too high and you don’t want to reduce the loan amount? You can spread it over a longer period: The total repayment amount will increase, but the monthly payment will be lower.

What is the loan’s interest rate? What type of interest is it – a fixed, unlinked rate that doesn’t change throughout the loan period (but is usually more expensive), or a variable rate linked to the prime rate or the index? Are there any additional costs, such as a file-opening fee or early repayment fee?

Do you want to receive the money with minimal time and bureaucracy? It’s important to check in advance whether the loan has any conditions, such as the need to provide guarantors or collateral (providing collateral can help reduce the cost of the loan). In addition, for some education-specific loans, you may need to present proof of enrollment and meet the program’s criteria. This is different from a general-purpose loan, where the money can be used for a variety of purposes. In this way, for example, you can fund both tuition and living expenses for your child studying for a degree.

Especially when it comes to a loan spread over several years, the family’s financial situation may change during that time. Therefore, it’s recommended to check in advance whether you can, if needed, reduce or increase the repayment amount along the way (of course, such changes may affect the total repayment amount, the monthly payment, and the loan’s duration).

In addition, the Phoenix loan offers freedom from bureaucracy: No need to provide collateral, guarantors, or proof of enrollment. Simply submit an online application, and if approved – in accordance with Phoenix’s policies and procedures – you receive the money within a short time. And if your financial situation changes after you’ve already received the loan? You can at any time log into the Phoenix website and submit a request to reduce, increase, or temporarily freeze your monthly repayment.

Credit provider: The Phoenix Consumer Credit Ltd., License No. 67136. The above does not constitute an offer of credit. The granting of any loan and its terms are subject to the sole and final discretion of the lender, its procedures, and its conditions. Failure to meet loan repayments may result in default interest charges and legal collection proceedings. Marketing content. Intended for general informational purposes only.