Whether you are a third-year student who has just recently completed your polytechnic studies, or a current student who has your eye on further education, the different financing options can seem confusing. Education fees can be an expensive burden but consider it a long term investment in ourselves. Here is a quick introduction to all the different types of study loans available in Singapore.
Understanding Student Loans in Singapore
Study or education loans are needs and purposeful loans which are deemed as exempted loans in your credit report. One thing to note is that the interest rates pegged to these loans are typically lower than that of other loans such as personal or mortgage loans.
It is important to be fully aware of the several types of education loans available in Singapore. Different loans come with different terms and it is essential to read through them to find a loan best suited to your future repayment ability before committing to it.
Here are the various options:
- CPF Education Scheme
- MOE Tuition Fee Loan
- Education Loans from Banks/ Financial Institutions (FIs)
CPF Education Scheme
The CPF Education Scheme allows you to use your parents’ CPF to pay for up to 100% of your course fees. You will only need to begin making repayment a year after you graduate or a year after you have halted studying. This essentially means that you are given a year’s time to find a job to support your loan repayment.
The CPF Education Scheme is one of the best and commonly used option because the CPF Ordinary Account has the lowest interest rate at 2.5%. However, interest starts to accrue once the Ordinary Account Savings are withdrawn. Therefore, it would be a good idea to begin repaying the loan even before the repayment period starts! This would help you save money as you would pay lesser in totality of interest fees.
This scheme, however, is not applicable to non-Singaporeans, or those taking a part-time diploma or degree as well as if you are taking a second undergraduate course.
MOE Tuition Fee Loan
Offered by DBS and OCBC, the MOE Tuition Fee Loan is the next best loan option in Singapore. This loan allows students to borrow up to 90% of their fees with no interest charged during the student’s period of study. The repayment period must begin within 2 years of graduation.
Likewise with the CPF Education Scheme, the best way to manage this loan would be to make repayment whilst still studying so that when the repayment period does begin, your total sum owed would be lesser and hence, resulting in lower interest fees as well.
On hindsight, this loan may also be considered less stressful for students as they can focus on studying or building an emergency savings fund during their schooling years as interest is not being accrued during the loan tenure.
Education Loans from Banks/ Financial Institutions
These loans are typically considered more expensive than those offered by the government. Unless you are 21 years old and above, you will need a guarantor in order to apply for such bank loans. The loan amount is dependent on either your income or your guarantor’s income. There are four main consideration factors when taking a study loan from a bank:
- How much are you able to borrow from the bank?
- Confirm the tenure and determine how long you want to stretch your repayment. Typically, the maximum loan tenure is 10 years.
- Two loan repayment types
As shared within this article, there are several study loan options you may be eligible for. Whilst government schemes are recommended, it is highly advised to review and evaluate which loan is ideal based on your circumstances and what repayment terms best suit your future plans.
Varying amongst the banks, the maximum loan tenure typically stands at 10 years. Most importantly, take time to evaluate the interest rates offered, which is one of the vital factors in consideration.
Lastly, there are two types of repayment schedule. Monthly rest loans which allows you to perform repayment while you are still studying and interest-only loans which require you to perform repayment after you have graduated. In conclusion, Interest-only loans will eventually be more expensive in the long run and the sum to be repaid will be higher compared to monthly rest loans as you are not able to start repaying the loan while you are still studying.
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By Credit Bureau Singapore
