Are you looking to make your education more affordable? Consider a study loan, an excellent way to pay for university without breaking the bank. But how does a study loan work in Singapore?
This article will explain everything you need to know about study loans in Singapore. We’ll cover topics such as eligibility criteria, the types of loans available, the application process, and repayment options.
By the end of this article, you’ll have a better understanding of how an education loan works and whether it’s right for you. Let’s dive in.
What Is A Study Loan?
A study loan is a type of loan offered in Singapore to help students finance their education. It can be used for tuition fees and other related costs such as books, equipment, and living expenses.
The amount borrowed must be repaid with interest, usually within three to 12 years after the completion of studies. Unlike other types of loans, student loans have lower interest rates and flexible repayment terms.
There are three major options when it comes to education loans in Singapore. They are:
- CPF Education Scheme
- MOE Tuition Fee Loan
- Education Loans From Banks/ FIs
Eligibility Criteria For CPF Education Scheme
The Central Provident Fund (CPF) Education Scheme is a government-funded program that provides financial assistance to Singaporean citizens looking to get their first undergraduate degree.
It allows you to use your parents’ CPF OA funds to pay for your school’s expenses up to 100%. You’re required to start repaying the loan one year after you have graduated or terminated your studies.
The benefit of using the CPF loan for students is that the interest rate for the loan is pegged to the CPF OA 2.5% interest rate, which is lower than what is usually offered by banks and other FIs.
Some eligibility criteria to be aware of are:
Approved Universities
In order to be eligible for a CPF Singapore study loan, you must be enrolled in a local institution approved by CPF. Some of these schools are SIT, SMU, SUTD, NAFA, SUSS, and other institutions under the Polytechnic-Foreign Specialised Institution Framework.
Course Prerequisites
Even if you’re eligible for a CPF study loan, you may have to fund some percentage of your expenses if you’re enrolled in some type of course.
For instance, you can only withdraw up to 50% of your parent’s CPF if you’re studying in an arts college.
If you’re studying at a polytechnic or obtaining a technical engineering diploma, you can only withdraw 25%. Make sure to check what the percentage of withdrawal is for your course.
Financial Capability
If your parents have reached their withdrawal limit in their CPF OA, or they don’t have enough money in it, you won’t be eligible.
Other Requirements
You won’t be eligible:
- If you’re doing a part-time course or a degree, you won’t be eligible.
- You are looking to undertake a subsidized second degree when you have taken a subsidized first degree
- You’re not a Singaporean.
How Does The CPF Education Loan Repayment Work?
The CPF education loan repayment begins one year after your graduation or termination of your studies whichever comes first.
You’ll receive a notification from the CPF 3 months before your repayment period will commence. If you choose to pay back your loan earlier, that is, before the stated one year after grad or termination, you can reach out to the CPF.
You can pay back your loan for a maximum period of 12 years in monthly installments or as a lump sum. Keep in mind that you cannot use your own CPF OA to pay for the loan you borrowed out of your parent’s CPF.
What Is The MOE Tuition Fee Loan?
The MOE Tuition Fee Loan is another excellent alternative for student loans in Singapore. It can allow you to borrow up to 90% of your tuition fees. The hallmark of this loan is that you start to repay the loan 2 years after graduation, so you’re not charged interest while in school.
This is awesome, as it helps you focus on your studies without having to work, or you can work and pay off some part of the loan while in school at 0% interest.
Note that this loan isn’t available to students studying in NASS or Lasalle. Students in private universities or going abroad, are also exempted.
Education Loans From Banks Or FIs
These loans are a good alternative if you don’t qualify for a CPF loan or the MOE tuition fee loan. However, they are more expensive compared to government loans.
If you’re below 21, you’ll need a guarantor when applying to be eligible for an education loan from banks and FIs.
How much you can borrow from the bank will depend on factors such as your repayment ability (or that of your guarantor), and credit score.
Some of the best education loans from banks in Singapore are shown in the table below.
| Singapore Study Loan | Interest Rate Per Annum | Estimated Monthly Installment |
|---|---|---|
| POSB Further Study Assist Loan | 4.32% | $372 |
| OCBC Frank Education Loan | 4.5% | $375 |
| RHB Education Loan (Monthly Rest) | 4.78% | $375 |
| CIMB Education Loan (Monthly Rest ) | 5.39% | $423 |
What To Consider When Taking Out A Study Loan
Before taking out a study loan, there are several important factors to consider. Here are some of the key points to keep in mind when applying for a loan:
1. Maximum Loan Amount
Get an idea of how much you can borrow from each bank you’re considering. This will help you decide on the best amount to take depending on how much you need.
2. Student Loan Interest Rates & Repayment Terms
Research different lenders and compare interest rates and repayment terms to ensure you get the best deal for your needs. Some lenders may also offer flexible repayment plans or longer repayment periods so be sure you are aware of these options when making your decision.
3. Loan Tenure
Choose a loan tenure that is comfortable for you to repay the loan. Banks usually give 3-10 years of repayment periods.
4. Late Payment/Default Penalty
What is the fee if you default for a month or pay late? If you also default on the overall repayment period, it might attract some fees. Ask to know what those are.
5. Other Fees
Fees including processing fees usually at 2% will be charged. However, find out if there are early repayment fees if you choose to pay off your loan before the end of the repayment period.
6. Monthly Rest Loans Vs Interest-Only Loans
For Monthly rest loans, you start paying back the loan and interest while in school. While interest-only loans require you to pay just the interest while in and pay the outstanding amount including the principal after graduation.
Monthly rest loans are recommended as they are cheaper in the long run compared to interest-only loans.
7. Financial Situation
Before signing any documents, make sure you understand your current financial situation and potential changes that could occur in the future. Ensure that the loan is something you can realistically afford before taking it on.
Study Loans Can Make Schooling Easier
Obtaining a study loan in Singapore can make schooling easier as you can go through school without much financial constraint.
But sometimes, you may not qualify for a CPF loan, or a MOE loan or your loan amount might not be approved by the bank.
In this case, you can obtain a personal loan from a licensed moneylender like Credit 21 and get approved instantly.
With just a monthly salary of $1,200, you can borrow up to 6 times your monthly income at competitive rates. Contact us today or apply for a loan online.
