Are you entering university soon? If you are and finding ways to fund your university fees, this article is just for you! Below is an introduction to all the study loans available in Singapore for those who are about to start their tertiary education.
Understanding Singapore Student Loans
Study loans are needs and purposeful loans which are under exempted loans. An introduction to Singapore’s study loans are that the interest rates pegged to them are typically lower than that of other loans such as personal loans.
It is important to understand that there are several types of student loans available in Singapore. Different loans come with different terms and it is important to read through them to find a loan best suited to your future repayment ability before investing in them.
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 to make 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 repayment behaviour.
The CPF Education Scheme is one of the best and 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 However, interest starts to accrue once the Ordinary Account Savings are withdrawn.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 making repayment even before the repayment period starts! This would help you save money as you would pay lesser in interest fees.
This scheme, however, is not applicable to non-Singaporeans, or those taking a part-time diploma or degree, or if you are taking a second undergraduate course.
MOE Tuition Fee Loan
Available at DBS and OCBC, the MOE Tuition Fee Loan is another of the best possible loans in Singapore. This loan allows for students to borrow up to 90% of their fees and no interest is 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, your interest fees would be lower as well.
Alternatively, this loan may also be helpful as you can concentrate on studying or building an emergency fund during your schooling years as interest is not being accrued.
Education Loans from Banks/ FIs
These loans are typically more expensive than those offered by the government. Unless you are 21 years old, you will need a guarantor in order to take such loans from the banks. Yours/ your guarantor’s income will affect the amount which the bank is willing to lend you. There are four main factors to consider when taking a study loan from a bank as follows:
- How much are you able to borrow from the bank?
- Confirm the tenure and determine how long you want to stretch your payment for. Typically, the maximum loan tenure is 10 years.
- There are two repayment types
As introduced by this article, there are multiple types of study loans you may be eligible for. Whilst government schemes are the most highly recommended, it is always advised to review and evaluate which loan will work for you best based on your circumstances and what you are looking for when it comes to the repayment of the loan.
As mentioned, depending on the banks, the maximum loan tenure typically is 10 years. Third, the interest rate, which is one of the vital factors when considering which bank to choose from. Forth, the repayment schedule which has two types. Monthly rest loans which allows you to perform repayment while you are still studying and interest-only loans which only require you to perform repayment after you have graduated. Interest-only loans proved to be more expensive in the long run and the sum to be repaid will be much higher compared to monthly rest loans as you will not able to repay the full loan repayment while you are still studying.
This article was contributed by Credit Bureau Singapore. Follow CBS on Facebook and Instagram @creditbureausingapore if you would like to learn more about similar things!