How to perform a career contortion

Want to change your working life but fearful about the financial upheaval? Sam Dunn reports on ways to fund a fresh start

Whether you are downshifting to escape the rat race or embarking on an MBA course to clamber further up the corporate ladder, a career change can turn your finances and family life upside down.

Whether you are downshifting to escape the rat race or embarking on an MBA course to clamber further up the corporate ladder, a career change can turn your finances and family life upside down.

Indeed, so great is the potential for upheaval caused by swapping the nine-to-five to retrain for a new life as, say, a vet or a freelance designer that most of us don't live the dream.

According to research from i-to-i, a consultancy for people who want to do voluntary work overseas, the vast majority of workers in their twenties and thirties carry ambitions beyond their current job. But only 2 per cent do something about it.

Anxiety about money is the chief obstacle: nearly a third of respondents to the i-to-i survey wondered how they would pay the mortgage. And one in eight worried about falling behind with their pension contributions.

However, tens of thousands of people do make financial sacrifices to pursue their dream job.

Each year, the number of people taking postgraduate qualifications rises by between 5 and 10 per cent, says Mike Hill, chief executive of Graduate Prospects, a company that helps people plot a new career path. "In many cases, it's somebody who may feel they have reached a ceiling at work or who first took a degree 20 years ago and now wants an MSc or MBA [to make further progress]."

If you are happy in your work and just want to gain further qualifications, speak to your company first. Many employers will lend you money to help with the costs, says Mr Hill, and may offer a special rate for staff.

For most of us, however, a big career change involves leaving our job. But finding money to pay for a course - as well as covering outgoings such as a mortgage - when you haven't got an income could be a problem.

Filling this gap, and used by many people, are government- subsidised career development loans. The Department for Education and Skills says 17,331 CDLs were taken out between April 2003 and March 2004.

Like student loans, these don't have to be paid back until after your course has finished and you are (hopefully) working in your new career. You can fix the repayment period for between one and five years.

The Government in effect subsidises the CDL by paying the interest while you study - and for an extra "buffer" month once your course ends - so you don't have to worry about charges racking up.

Only three banks - Royal Bank of Scotland (RBS), Barclays and the Co-op - offer a CDL. Applicants can borrow up to £8,000 to pay for up to two years' study.

Each bank offers different repayment choices according to the length of the course and the period over which you repay the loan. They also charge different rates of interest, yet the amount you repay seems to bear little relation to the annual percentage rate (APR), so ask the lenders about the overall cost.

For example, if you borrow £5,000 to pay for a one-year course, the Co-op's APR of 14 means you would pay £115.97 a month over five years - a total cost of £6,958.36. At RBS, the same loan would cost £7,500 even though the APR is a lower 12.3. The cheapest loan is available from Barclays: it costs £6,791.40 and has an APR of 9.9.

Your own credit rating, financial needs and potential future earnings will also play a part in the rate you pay.

Of course, taking out a £5,000 personal loan at a competitive market rate would be cheaper, but you would have to start repaying it straight away.

If your career change involves expensive professional training costing more than the CDL's £8,000 cap - if you go into medicine, accountancy or law, say - a high-street bank should be able to offer a professional studies loan. You won't have to start paying this back until you finish your course but you will be charged interest during this period. Lloyds TSB will lend up to £10,000, at an APR of 9.9.

It's essential to prepare for changes in your income. Start by saving up six months' salary for emergencies: this should be kept in an easy-access mini cash individual savings account, or in a deposit account paying a good rate of interest.