As soon as you finish school, you are eager to start off your higher education. However, today the cost of education has risen so much that even for a three-year course in Singapore you are required to pay approximately S$30,000, or in some cases, higher. In case you are planning to move overseas for your education, you will also have to consider additional costs apart from your tuition fee.If you opt to study at public institutions such as NTU or NUS, they are likely to provide you with study loans. Education loans are a kind of personal loan. In case your parents have CPF accounts, you can make use of the CPF Education Scheme. If you are still short of funds, you will have to eventually go to a bank and apply for an education loan. In Singapore most banks offer students education loans and all you need is a guarantor who earns at least S$30,000 per year to have your loan approved.
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The tenure of your loan vary and can be as short as a year to as long as up to 10 years. Normally banks offer different types of payment schemes:
There will normally be a 2% processing fee involved which is usually deducted from the first disbursement. A cancellation fee will also be charged in case you put your signature on the offer letter and back out subsequently. In addition, depending on the type of payment you choose for paying instalments, you might have to pay disbursement fees.
If you repay sooner than the tenure of the loan gets over, most banks will penalise you with a prepayment fine. As people pay off their loans as soon as possible to avoid paying interest, banks normally charge a fee to cover a part of the lost interest payments.
As the rate of interest vary all the time, you must do your own enquiry before deciding on a loan instead of banking on others’ recommendations. Let us take a look at the interest rates on education loan offered by various banks:
|Bank||Processing Fee||Interest Rate|
|Maybank||2%||4.50% p.a. onwards|
|POSB||2%-3%||4.60% p.a. onwards|
With Maybank's education loan , you can enjoy repayment tenures of up to 10 years for overseas education. The interest rate is the lowest and you can select from an array of participating institutions. You can even choose form three flexible repayment options – Standard Repayment, Partial Repayment, and Interest Servicing. Refer to the table below to know more about this loan:
|Loan amount||Up to S$200,000 or 8 times your salary per month|
|Late payment charge||3% or S$30|
OCBC Tuition Fee Loan does not charge any interest rate and is one of the best study loans for local studies. With loan tenures of up to 20 years, you can choose NUS, NTU or NIE to study. You also choose from two repayment schemes with instalments as low as S$100 – Partial Payment and Full Payment. Check out the table below to know more about this product:
|Loan amount||Up to 90% of the tuition fees|
|Late payment interest||1% per month|
|Minimum monthly payment||S$100|
If your POSB further study assit gets approved, you can repay the total amount in five years if you choose an institution from the bank’s list. The bank does not charge for issuance of cheques and is currently offering an interest of 4.60% p.a. if you select from POSB’s Preferred Institutions. The table below shows the other charges applicable on this loan:
|Loan amount||Up to S$80,000 or six times your salary per month|
|Late payment interest||S$30|
|Cancellation fee||No charge|
|Prepayment fee||No charges|
With RHB Education Loan , you can either study at a local private institution or overseas university. You can enjoy an interest rate of 4.38% p.a. and pay the loan amount over 10 years. This bank lets you choose from three repayment options – Standard, Graduated Repayment, and Deferred Repayment. Check out the table below to know more about this loan:
|Loan amount||Up to S$100,000 or 6 times your salary per month|
|Late payment fee||5% above Prime Lending Rate|
|Partial prepayment fee||1%|
OCBC Tuition Fee Loan does not charge any interest rate and you do not have to repay during the course of study. With loan tenures of up to 20 years, you can choose NUS, NTU or NIE to study. You also choose from two repayment schemes with instalments as low as S$100 – Partial Payment and Full Payment. Check out the table below to know more about this product:
|Loan amount||Up to 90% of the tuition fees|
|Late payment interest||1% per month|
|Minimum monthly payment||S$100|
You can apply for this loan starting from the age of 17, however, you must have a guarantor who can apply for the loan if you do not have any income. The guarantor can either be your parent or anyone who is willing to vouch for you. Here are some other qualifying criteria that you have to fulfil to qualify for an education loan:
You might graduate from your university with excellent grades and land a good job and a big paycheque. In this case, you will not face any problems repaying the loan amount. But, things don’t always go according to plan and you may not be able to repay your loan.Considering you took a loan for an undergraduate course and are unemployed, the bank is aware you are broke. However, the bank also knows that your guarantor is not. Hence, if you are unable to repay the loan amount, your guarantor will be liable to pay the entire amount on time.
If the loan still does not get paid, the bank has the right to take legal action against you and your guarantor. Since these loans are unsecured loans, none of your assets will be forfeited.With the monthly rest loans, you are required to pay the standard repayment or at least the interest repayments during the course duration. You can choose the interest-only loans, which require you to pay only the interest amount while studying. You can repay the principal amount after the completion of your course. Interest-only loans are more expensive than monthly rest loans.
If you are a full-time student with no annual income or if you are below 18 years of age, then the bank requires you to nominate a guarantor, who can pay the loan on your behalf, till you find a job. Your guarantor is liable to pay the entire amount, should you default.
Education loans in Singapore are divided into two types, flat rate and monthly rest. In case of flat rate, the entire sum is calculated at the beginning of the loan while with monthly rest, the interest is computed based on monthly balances.
It is daunting to know that the cost of education has periodically increased. You may need thousands of dollars to get a degree from National University of Singapore (NUS). The private education institutions may charge even more. However, most of the financial institutions in Singapore provide a student loan to help you in this situation.
Let’s take a look at why it is not always a good idea to use your savings to pay for your education. Here are a few circumstances when you must go for education loan even if you have cash:If You Want to Study Abroad
When you study abroad, there may be certain reasons due to which you may require money, such as:
Hence, it is always a good idea to keep your saved-up money and take up an education loan.Unexpected Medical Costs
If you are suffering from any medical condition which is not covered by your insurance policy, you should always save money for any healthcare expenses. If you spend your savings on education fees, during an unfortunate medical emergency, you may run into a financial crisis.Opportunity Costs
You may need cash in the following situations as well.
If you start education at a late stage of life, you may have dependents to take care of. Whether you have kids, elderly parents, or any other dependant, it is a good idea to keep your cash for any unexpected situation and take an education loan for your fees.
Most banks allow you to apply online through filling up an online form. You can also download the application form from the bank’s website, take a print-out, fill it up and submit it at the nearest branch. Most banks will provide you with a list of approved institutions. In addition to the application form, you will also have to submit the following documents:
All study loans are unique as they are designed to fund your higher education. Although education loans are like personal loans, they cost less and have flexible repayment options.
Low interest rates: Unlike personal loans, education loans have low interest rates and are considered as low-risk loans. The interest rates are mostly fixed, so you do not have to worry about the rates changing. You can also enjoy preferential interest rates if you enrol in any of the bank’s partner universities.
Easier approval: Several students do not have jobs or credit scores. In that case, education loans are easier to get as you need to present a guarantor who earns at least S$24,000 per year. This way, you will not only get approval, but also establish credit.
Repayments: Several study loans in the country offer flexible repayment options. If you do not have an income, you can choose to pay only the interest amount till you graduate. You can make full payments once you are done with your higher education.
How long does it take for banks to process the loan application?
The banks take three to four working days to process your education loan application.
What are the differences between a study loan and an education loan?
With an education loan, you will get funds that will cover only your course fees. In contrast, a study loan also finances supplementary expenses that you will incur during the course of your study, for instance, laptop, textbooks, and accommodation.
Who can be my guarantor?
Your immediate family member like your sibling, parent, child or spouse can be your guarantor.
Can I have more than one guarantor?
No, you cannot have more than one guarantor.
Do I have to submit any document to prove my relationship with my guarantor?
Yes, you must provide either a Marriage Certificate or Birth Certificate to prove your relationship.
How can I make monthly payments?
You can pay the loan in instalments either by funding your loan servicing account or through internet banking.
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