Homeowners in need of extra cash often turn to secured loans in order to meet their funding needs. Typically this money has been used for home improvements or the purchase of a new car, but recent statistics show that more people have started to take out loans to pay for private education. An analysis of government data by Sainsbury’s Finance has shown that 18 thousand loans, including those secured against people’s homes, were taken out to pay for children’s education. These loans equated to around £165 million pounds, which is a staggering amount of money. The main reason behind this has been the increase in private school fees by an average of 6.2 percent in the last twelve months making the most common private school fees more than eleven thousand pounds a year.

Parents were taking out loans which averaged nine thousand pounds each to cover school fees, so that their children could remain in private education. Some of the reasoning behind this has been attributed to the rising cost of living in the UK and the instability of the job market. Many city workers have lost their jobs in recent months which may have had an impact on the number of parents now able to afford school fees. School fees have risen above the rate of inflation but private schools have also been hit with the rising cost of food and fuel and therefore are forced to pass this cost onto  parents.

But experts have warned parents to be careful both when choosing the right school for their children and also when choosing the right loan to fund it. Last month Chris Woodhead, who was the former chief inspector of schools, told parents that they could be being ripped off by schools who were spending more money on ‘five star facilities’ which may not be delivering any additional educational benefit to  the pupils.

In addition many state school students have been receiving constantly good results over the years which may cause parents to question whether a private education is worth the additional money.  If parents do decide that a private education is the way to go, then paying for the fees and any additional costs needs to be considered carefully.

 A secured loan often offers better rates than other loan types but they are secured against your home which can be a gamble. In the current economic climate people, experts warn that people should be try to secure their assets as opposed to making them more vulnerable. Shopping around for the best deal, will help parents understand what loan options are currently available on the market and help them choose the best one to match their needs.

Often people turn to the current account provider as they know the bank already and want the easiest solution; however this rarely turns out to be the best deal and parents already facing financial hardship need to find the best option, in order to minimise their outgoings.