Education Loan

    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.

    Types of Education Loan

    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.

    Why Should You Take an Education Loan?

    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:

    • Student lodging costs could vary.
    • House rent may increase if you stay outside the campus.
    • Currency exchange rates can increase any time.
    • Policies of a foreign government can change resulting in additional costs.

    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.

    • After your education, you may have a business plan which requires money for investment.
    • After your graduation, you may not get a job immediately, so you will need money for your expenditure.
    • You may get a job opportunity which you may not be interested in. In such cases, instead of taking up the opportunity for managing your expenses, you can wait for the right opportunity if you have a financial backup.

    You Have Dependents

    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.

    Some people may choose to take a personal loan for their education fees without understanding the importance of educations loans and their interest rates. Taking a personal loan for education is not a great idea because personal loan interest rates could be higher than those of education loans. You must always do a complete research on education loans from various banks in Singapore, to compare the interest rates and benefits. 

    Features and benefits

    • Multiple payment options
    • 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:

      • You start repaying soon after disbursement.
      • You pay a fraction of the entire loan amount until the time your course ends.
      • You pay only the interest amount until the end of your course.
      • You start repaying only after your course is over.
    • Fees involved
    • 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.

    • Prepayment fine
    • 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.

    Interest rate

    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 CIMB Maybank OCBC POSB RHB
    Interest Rate 5.83-9.18% p.a. 4.5% p.a. 4.5-5.17% p.a. 4.6-5.88% p.a. 4.38-4.88% p.a.

    Eligibility Criteria

    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 must be a citizen of Singapore or a Permanent Resident.
    • You should have an income of at least S$12,000 p.a.
    • If you are not employed, your sponsor or parents can apply for the education loan.
    • You can apply jointly with two or more sponsors.
    • Your loan guarantor should have an income of at least S$30,000 p.a.

    How to apply for an Education Loan

    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, download the form, 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:

    • If you are employed, you will have to submit a recent salary statement or CPF contribution history statement for the past 12 months or the latest Income Tax Notice of Assessment.
    • A Letter of Acceptance from the institution where you will be joining stating your course, total course fee and course duration.
    • If you are self-employed, you will need the past two years of Income Tax Notice of Assessment.

    Let us now take a look at some of the best education loans available in Singapore for local studies:

    ·         Maybank

    With Maybank, you will get an education loan with an interest starting from 4.50% p.a. Some benefits of this loan include multiple repayment options, loan amount of up to eight times your monthly income, flexible repayment tenure and more.

    ·         OCBC

    OCBC Bank offers education loan at a low interest rate of 4.5% per year. The loan amount that you receive can go up to S$150,000 or ten times the monthly income of your guarantor. You can get a loan for studying at local as well as overseas institutions. You can choose from three different repayment options with a term of up to eight years.

    ·         POSB

    The best part of an education loan offered by POSB is you do not have to pay early repayment charges if you opt to repay your loan prior to the end of the tenure. Repayment period varies from one to five years and you can get a loan of up to six times the total monthly income of you and your guarantor combined.

    The education loan that you select must complement your ambitions. You must be clear about what your plans are, whether you want to study in Singapore or overseas. What kind of job do you expect to get once you are done with your studies? You ideally should not borrow more than what you expect to earn in the first year after graduating.

    Frequently Asked Questions

    Q. What are the tenures available for education loan?

    A. The terms are different for different education loans, but it normally ranges from 1 to 10 years. There are banks that let you defer your repayment until after your studies are over.

    Q. What is the lowest interest rate that I can get on an education loan?

    A. All banks change their education loan interest rates at regular intervals. Education loan rates normally range from 3%-6% p.a.

    Q. Can I apply for an education loan if I am younger than 21?

    A. If you are younger than 21 years, a family member of yours or an unrelated person can apply for the loan for you with you being the joint applicant.

    Q. What are the differences between a study loan and an education loan?

    A. With an education loan, you will get funds that will cover only your course fees. In contrast, a study loan finances all supplementary expenses that will incur during the course of your study, for instance laptop, textbooks, accommodation and more.

    Q. How long does it take for an education loan application to be processed?

    A. It normally takes about three to five working days for an education loan to be processed on an average upon receipt of all necessary documents. However, this period differs from bank to bank.

    News About Education Loan

    • PayNow Linked to Edusave Awards for Faster Funds Transfer: MOE

      The Singapore Ministry of Education (MOE) has announced that PayNow has been linked to Edusave Awards, helping winners receive cash prizes instantly in their accounts. The transfer will be done on the day of the ceremony. So now the winners will not have to wait for two days before withdrawing the money.

      18th January 2018

  • reTH65gcmBgCJ7k
    This Page is BLOCKED as it is using Iframes.