Absolutely terrified of childcare costs. Is this a decent alternative or am I making a deal with the devil?

[greenPandas]

Recently had my ds and have been looking into the price of childcare in London. I realised that I would have to fork out roughly £1000 a month to have him in nursery full-time while I work.

Definitely cannot afford to do this. But I really cannot afford to take time off work either. I have few people gunning for my job and being constantly absent would give management the opportunity to put me on the backbench.

I spoke to a friend who told me about a new company that covers your child care for the year and spreads the cost. You pay them back over a longer period of time. I contacted them and found out that I could pay £200 pounds a month over 3 years rather than the £900 (think of it like car financing).

It would help massively because it means an extra £700 with every pay check. But I am a little nervous, because it is essentially a loan.

Although I do need help with childcare, I'm not too sure if financing is the best option. It's a relatively new company and haven't met many people who have used them.

What do you guys think? What would you do if you were in my shoes? Should I go for it, or just bear the costs.

Not a chance I'd do this. You will be paying that loan off for years. Where's the father in all of this? He needs to stump up for childcare too.

Where's the father of the child in all this? Why isn't he sharing the cost of childcare with you?

Have you looked at benefits? I think they can help with childcare costs if you work. Not sure of details. £1000 sounds suspiciously cheap for London, though.

Firstly child care costs should be shared by both parents in a proportional ratio to their earnings.

Secondly, look at the cost of not working. For example, if you don't work for 3 years, when you rejoin the jobs market what level job are you looking at and what salary? Are you prepared to potentially start at the bottom of your career ladder again? (Employers can be shortsighted about career breaks)

Child care is like university fees - an expensive but necessary investment in your future career and earnings.

Pursue the father for maintenance. Pay for childcare upfront and seek to reduce other costs, and to earn more.

I can’t see how this maths will add up. For each year of childcare, you’ll be paying for 3?

I wouldn’t do that it’s a huge financial commitment for future when you’re likely to have more costs coming up. With all due respect surely these are things you should research a bit before having kids...? We moved out of London to Manchester after having our DC due to cost.

if they are offering loans than they should be registered with FCA - if they aren't than they are illegal (I am fairly sure of this - will ask someone I know there to confirm) what is the name of the company?www.london.gov.uk/sites/default/files/gla_childcare_deposit_loan_-_toolkit_final-_jan_2019.pdf
However there is a deposit loan see above.

Sounds like a bad idea to me - essentially you're getting a loan. Factor in that you'll need more than one year of childcare too.

Also, full time childcare for an under 3yr old at 900-1000 sounds very cheap. Are you sure that's right? I'm not in London and nursery fees for DD 3 days a week only are 800+.

Everyone has the freak out about cost of childcare but somehow you manage. Maternity leave helps as you kind of learn to live on lower income then anyway!

This is a terrible plan, sorry. You will end up in debt and will either get further in debt if you keep working, or will give up work and still have then debt. The only viable option is a childcare/work balance that you can afford now.

Never heard of that OP and not sure I follow the model. It's not like car financing as there is no asset that the loan is secured on. Don't see how a new company run this with a 3.4% unsecured loan. Plus the amounts don't stack up.

£1,000 a month for a 12 month old full time sounds cheap for London - is that including some tax free childcare or childcare element of UC?

Would your employer consider allowing you to work compressed hours? What about the father? Any friends or family that could cover a day a week to reduce childcare costs?

Thinking about this the other way around: why would I lend you money without there being an underlying asset? With a car loan, the lender owns the car so can sell it. With a mortgage the lender owns the house so can sell it.
With the deal you are looking at, what does the lender own? Nothing. So it's an unsecured loan, thus a higher risk of default, so would typically have a higher interest rate. So what is in it for the lender? This does not sound a good idea, unless it is something your employer is providing... that would be more like a salary advance, could even be an ESC scheme (Employer Supported Childcare).

Have you got a link to the scheme?

Sounds dodgy and even if it's legitimate, it's a bad idea.

Are you a single parent or not? If you have a partner they should be contributing to childcare costs. If you are single, look into whether you would be eligible for help with childcare costs via Universal Credit (this depends on all sorts, but essentially if your income is under the threshold you might get up to 85% of childcare costs paid for). If not eligible for UC, Tax Free Childcare will cover 20%.

Have you looked into childminders? They are usually cheaper than nurseries.

£900 for a full time nursery space in London????🧐
We pay probably double that

I don't think this company is real, or if real it's not legitimate - there's no sign of an online presence. Either your friend is scamming you, or she's being scammed herself and doesn't yet know it.

Even assuming it’s legitimate, this scheme wouldn’t allow you to pay by money-saving methods such as Tax Free Childcare. So, before you even consider the interest payments, you’ll be paying about 25% more than you need to.

Have you looked at childminders? They’re often cheaper than nurseries. Although £900 full time is already cheap for london?

Yes it doesn’t sound right

Childcare vouchers through work might help

And where is the dad in all of this

£900 for full time childcare in London is a typo surely. I pay £1500 a month in East Anglia.

Where is the father? It’s not just your responsibility to shoulder the cost of childcare. Would flexible working/part time/working some from home be a possibility?

I have never heard of such a scheme
I don’t think you can use the government scheme either if the loan company pay the nursery as your child tax account will be paying the nursery too

I would prefer to get a proper bank loan rather than a finance company

You might be better off with a loan from a more trustworthy source. Is it likely that sticking with your current job could lead to a promotion or higher earnings in the next couple of years or are you likely to struggle to pay it back later?

I think using finance is an ok idea but I’d just get a standard loan to help you top up - I borrowed 10k from Sainsbury’s at 2.8% for 5 years - repayments 178 per month. You can borrow more and for longer, and if you keep the balance in a savings account it will help you offset some of the interest. Why not do something like that? You’ll qualify for the 30 hours at some point too which will help.

If you work FT, childcare doesnt just stop when they go to school. You will still be paying before school, afterschool and holiday clubs. This sounds like a disaster - just compounding debt over the years, and the end being quite a long way in the future. I'd stay well clear.