Re: Money
Here's my feedback from just having completed the dealings with the bank, and now looking at insurance.
Oddly, money is the topic no one seems to talk about when it comes to CTC. Why, I don't know. For sure, none of this is top secret, but you don't find out the detail until you're through selection, so I see no reason to not share this info here. It may affect an applicant’s decision or perhaps spur people into seeking alternate sources of funding/insurance or whatever. However, every CTC person I've been in touch with has taken advantage of the financing from HSBC, and I struggle to think where one might stumble across other unsecured £60K+ loans with a 2 year deferral period unless one is lucky enough to have something silver jammed up one's arse.
There are a few elements to the finance:
1) £60k Loan
2) Living Expenses
3) Foundation Course Fees
4) Accounts
5) Arrangement Fees
6) Liability
6) Insurance
7) Credit Score
60K Loan
HSBC will provide a £60k Professional Studies loan to you at a rate of about 2.75% above (their) base rate, so the interest rate is currently ~8.5%. This is a variable rate, so in the current climate this is likely (IMO) to rise. Sure, rate rises are the saver's friend but they'll light a fire under my arse from this point forward.
The £60k is drawn down on a monthly schedule, passing from the bank direct to CTC. You don't get your mitts on that money, so forget sticking it in some investment vehicle to offset the interest. Interest is accrued on the money from draw down date, so you are not accruing interest on the full amount from day 1. CTC/HSBC give you a monthly draw down schedule so you know when the payments go out.
The repayment term of the loan is 7 years. That period commences when you start fulltime with an airline i.e. deferred for two years. You must contact HSBC to inform them of your employment situation then you start repaying. At today's rates, repayments would be 84 payments of £1030 per month, giving a grand total of ~£84,000. Taking the loan now, with 2 years of deferred repayments, and the money being drawn down directly to CTC in monthly instalments (Deposit £5400 then £4200/month thereafter), results in 7 years of repayments at £1030, assuming a constant rate of interest.
Overpayment is possible. There appears to be a tricky way that they handle repayments, bulking them up and applying them quarterly while they calculate interest daily. If I understood that correctly, this means no payments in a given quarter take effect until, say, the end of the quarter. This means you pay more interest on the loan in that quarter than you would have if your payments were credited to the loan the day you made them. I could be wrong, but the HSBC staff member gave me a very muddy explanation of this. I am seeking clarification on it.
Living Expenses
In addition, you can borrow a further £10k living expenses, and $12,000NZD for the foundation course (which has just gone up to $13,000NZD), both of which are subject to the same rate of interest. Borrowing £10k over 7 years at that rate will cost you ~£4.5k in interest. The living expenses can be paid to you on a regular basis e.g. £400 per month, or on demand. If you never demand, you never pay back. The rates of interest and the repayment period are the same as the £60k.
Foundation Course Fees
I assume the foundation loan is the same as the main loan, but check with HSBC.
Accounts
You must set up two accounts with HSBC: the loan account and a current account. This is a graduate account product that is either free, but charges you for foreign transactions, or £9.99 a month with no such charges. I have yet to see the T&C's for operation of the current account in relation to your total liability to HSBC so whether you must use this account, and what constitutes "use" is unclear at this time. HSBC's application process also provides a Maestro card and a Mastercard with a small limit ~£500.
Arrangement Fees
There are £100 arrangement fees for both the living expenses and the main loan. I assume one would apply to the foundation course fees too, not sure.
Liability
All the monies are your liability, no one else's, except within the first £30k that CTC will accept liability for should you not be up to scratch. Apparently this is £30k of expended training although how on earth that's calculated is beyond me and whether any of the foundation counts towards it isn't clear either (considering we're paying for that stage ourselves, I don't see why it should). I have yet to receive my training agreement and so have not seen any contractual agreement relating to CTC's willingness to take liability for the first £30k.
As has been mentioned elsewhere, if you look at EZY's pay scales, CTC cadets are paid exactly £12k lower than direct entry FO's. This means that the airline is not really paying off your loan. You are. Probably a benefit of doing it this way is that you don't pay tax on the £1000 repayment that comes from EZY, but I am not sure. Understand that I am not bitching about this arrangement, just highlighting something coincidental. At the end of the day, I'm not knocking the setup, I'm grateful for the opportunity!
Insurance
You will then also need to insure yourself against certain risks to ensure that the monies are covered in the event of death, loss of medical etc. The broker that CTC put us in touch with gave multiple policies that together total about £1200 for people up to the age of 29. This also includes personal accident, personal possessions while in NZ etc. However, they have not sent the full policy wording so it's difficult to understand exactly what you're being offered and, more importantly, all the exclusions to the cover. I am waiting to be sent fulll wording before I make a decision. Alternatives are available from other sources, including BALPA, so get in touch with them and shop around is my advice. You cannot borrow funds from HSBC to cover insurance expenses, for obvious reasons.
The bank financing is locally administered by HSBC Hythe, down the road from CTC Dibden Manor. You must attend Hythe branch to go through the finances. HSBC didn't attempt to offer insurance products, although I did ask. I suspect that they don't want to underwrite their own risk (if they really underwrite the risks entirely themselves), but that's speculation on my part, and/or aren’t so competitive for our risks and/or don’t cover our risks.
If you can find a better financing option than the above, please share it as I'm sure it's of great interest to many of the readers of this thread.
Credit Score
Critical information, for those that are blissfully unaware, is CREDIT SCORING! You should and must know what your credit reference files are like. If you have any defaults, dodgy associations or whatever on your file, you are much less likely to be granted the finance from HSBC. If you know nothing about credit scoring, get genned up. Then get copies of your credit reports from Experian and Equifax, and fix any problems or errors that may exist before you go to the bank. Wiser still, have it sorted before you get too far through selection, as it is just a pain in the neck to have it interfere with your start date.
Something else - not sure whether it's possible to offset any of one's liabilities for tax purposes. Sounds like a job for SuperAccountant!
Last edited by MajorYaw; 1st May 2007 at 15:02.