How Does Education Loan Work in Singapore

How Does Education Loan Work in Singapore?

It is no secret that Singaporeans are among the most hardworking people in the world: goal-driven and serious in taking their careers to another level. If your goal is to find a decent job that will hopefully help attain your preferred lifestyle, getting a high-quality tertiary education should be on top of your mind.

Depending on what programme, a student will need roughly $8,000 to $32,000 to complete a four-year course. Even families who are able to save up for college education still need financial assistance for unforeseen projects and activities. How much more for those who weren’t able to prepare for it? 

Situations like this are among the common reasons why education loan is important among Singaporeans. This article aims to discuss everything you need to know about how education loan works and other pivotal things for your decision-making moving forward.

Ways to fund Tertiary Education in Singapore

Thinking about where to get the money to support your tuition fee can be overwhelming. We totally get that. So to make it a little easier for you, here are some ways you can support your education:

1. Bursary

To put it simply, bursaries are government-backed financial assistance given by the Ministry of Education (MOE) and administered by your school. Although this financial package doesn’t come in huge amounts, it could help lessen the financial burden with no strings attached. A bursary is non-repayable and you will not be subjected to any obligations in the future.

Too good to be true? What’s the catch? The thing is, not everyone is eligible for this benefit.

Limitation: The amount of bursary a student will receive depends on his/her residential household income. According to MOE, Financial Assistance and Bursary scheme are offered to those who have Per Capita Income (PCI) with $690 to $2250 per month, no more than that. Finally, the amount a student can receive depends on the school and the kind of bursary his/her applying for. 

2. Ministry of Education (MOE) Tuition Fee Loan

Considered as one of ideal loans in Singapore, MOE Tuition Fee Loan lets university students borrow 90% of subsidised fees for university students and 75% subsidied fees for polytechnic students. The loan amount can cover parts of course fees and will not collect interest from the borrower until the period of study ends. The repayment period should immediately begin within 2 years after graduation.

However, MOE Tuition Fee Loan comes with a 4.75% interest rate. Compared to other loan priveliges, MOE Tuition fee loan interest rate is quite high. To make the repayment schedule easier and more bearable, it’s best to gradually begin with loan repayment while studying, so when the official repayment period starts, both the total amount and the interest fee would not be overwhelming for a fresh grad.

When taking such loans, the borrower should be aware of the maximum loan tenure. For MOE Tuition Fee Loan, loans given to borrowers from polytechnic has 10 years repayment period, while borrowers from university got 20 years repayment duration.

3. Central Provident Fund (CPF) Education Scheme

Pegged to the CPF Ordinary Account interest rate, this loan has a 2.5% interest rate per annum (pa). The interest rate for this CPF Education Scheme is far lower than those loans offered by banks, which makes CPF Education Scheme the cheapest study loan in Singapore.

In this scheme, borrowers are allowed to use the CPF savings of their parents to cover 100% of their tuition fees for courses approved by local institutions. As for the repayment process, the borrowers must start repaying the loan a year after graduation or when they decide to terminate their studies.

CPF Education Scheme is highly ideal for those who don’t have enough money to pay for education loans, and have no courage to take out loans from a bank. However, just like other loan options, CPF Education Scheme has some conditions.

Limitations: even if the course you’re targeting is included among the courses approved for CPF Education Scheme, there is a chance that you’ll be needing to shed some cash out of your pocket. Here are some instances:

  • If the parent does not have enough savings in his/her CPF Ordinary Account
  • Borrowers can only get 50% of the course fees if they’re studying in an art college
  • Borrowers are only allowed to take 25% of the course fees if they’re studying in a polytechnic or taking up courses like Technical Engineer Diploma or Technical Diploma in Culinary arts at ITE
  • Borrowers can only withdraw 10% of the fee if they’re studying in a university or foreign institution under the Polytechnic-Foreign Institution framework

Students taking a part-time diploma, a second undergraduate degree, and non-Singaporean citizens are not eligible for the CPF Education Scheme.

4. Education Loans offered by Banks

If it’s impossible to borrow from government-backed study loans, getting a study loan from a bank is another good option. Although CPF Education Scheme and MOE Tuition Fee Loan are much cheaper, banks offer student loans with reasonable interest rates that can have an extended repayment schedule.

OCBC, CIMB Bank, and DBS Bank, through POSB, offer generous amounts for education loans. For instance, POSB can get you a loan amount of $80,000, while CIMB Bank can provide a maximum loan amount of $200,000. On the other hand, OCBC bank offers up to $150,000.

If banks offer huge loan amounts, why are people still looking for other options? Here are common circumstances: 

  • Banks have more stringent measures in approving different loans.
  • They will look closely at credit scores and borrowing behaviours, as they want to make sure that the borrowers can comply with the agreed repayment scheme.
  • On top of that, the borrower will be charged with a processing fee.
  • Most of the time, banks will require the borrower to provide a guarantor.

There are two types of repayment schemes for bank loans: monthly rest loans and interest-only loans.

5. Personal Loans from Banks and Moneylenders

An education loan has a cheaper interest rate compared to a Personal loan. Furthermore, the prior option tends to have a longer loan tenure. Without a second guess, government-sponsored loans are more affordable than personal loans that have a shorter repayment period and higher interest rates.

However, there are instances when a student isn’t qualified for such funds –that’s when a personal loan comes in handy. Here are the pros and cons of getting personal loans from banks and money lenders:

Personal Loan from Money lenders

Pros
  • Fast and easy online loan application
  • Fast approval
  • Ideal for urgent needs
  • High approval rate
  • Short-term loan
Cons
  • Lower maximum loan amount
  • High interest rates

Personal Loan from Banks

Pros
  • Higher maximum loan amount
  • Online application
Cons
  • Stricter loan requirements
  • Longer Approval Time

 

Best Education Loan Interest Rates for 2021

Curious about the best Education Loan offers from banks? Arranged in no particular order, here are the numbers, figures and key features of the best education loans available in Singapore:

1. DBS Study Loan

Overview: This loan can grant the borrower 10x of his/her monthly salary. Having a loan tenure of up to 10 years, DBS Study loan is interest-free during studies and has no early redemption or cancellation penalty.

Key Features: 

  • $371.77/monthly 
  • Interest rate: 4.38%
  • Processing fee: 2.5% (approved loan)
  • Maximum loan amount: $160, 000

Eligibility: 

  • Age Requirement: 17-65 years old

2. POSB Further Study Assist

Overview: With a low processing fee of 2%-3%, this one is suitable for those who would have occasional late payments in between loan repayments. Like DBS Study loan, POSB offers 10x of the borrower’s monthly salary with up to 10 years loan tenure and has no early redemption or cancellation penalty.

Key Features: 

  • $371.77/monthly
  • Interest rate: 4.38%
  • Processing fee: 2.5% (approved loan)
  • Maximum loan amount: $160, 000

Eligibility: 

  • Age Requirement: 17-65 years old
  • Citizenship Status: Singaporean/PR
  • Employment Eligibility: Salaried employee, Variable income/Commission based earner, Self-Employed
  • Minimum Annual Income: $18,000 p.a

3. OCBC FRANK Education Loan

Overview: With a reasonable interest rate and flexible loan repayment option, OCBC is one of the best education loans for those who plan to study in a local university.

Key Features: 

  • $372.86/monthly
  • Interest rate: 4.5%
  • Processing fee: 2.5% (approved loan)
  • Maximum loan amount: $150, 000

Eligibility: 

  • Age Requirement: 17-65 years old
  • Citizenship Status: Singaporean/PR
  • Employment Eligibility: Salaried employee, Variable income/Comission based earner, Self-Employed
  • Minimum Annual Income: $24,000 p.a and above (individual or with co-applicant)

4. Maybank Monthly Rest Education

Overview: If you are a part-time student or planning to attend a very expensive university, this loan is best for you.

Key Features: 

  • $372.41/monthly
  • Interest rate: 4.5%
  • Processing fee: 2.5% (approved loan)
  • Maximum loan amount: $200, 000

Eligibility: 

  • Age Requirement: 18-65 years old
  • Citizenship Status: Singaporean/PR
  • Employment Eligibility: Salaried employee, Variable income/Comission based earner, Self-Employed
  • Minimum Annual Income: $18,000 p.a (for part-time studies only)

5. CIMB Monthly Rest Education Loan

Overview: Compared to other education loans, CIMB may seem intimidating as it has the highest interest rate offer. Their selling point is having a huge maximum loan amount and a 2% processing fee. 

Key Features: 

  • $381.01/monthly
  • Interest rate: 5.39%
  • Processing fee: 2% (approved loan)
  • Maximum loan amount: $200, 000

Eligibility: 

  • Age Requirement: 16-50 years old
  • Citizenship Status: Singaporean/PR
  • Employment Eligibility: Salaried employee, Variable income/Comission based earner, Self-Employed
  • Minimum Annual Income: $24,000 p.a (for principal applicant)

Alternative to Banks

Government education loans are great and affordable, but not everyone is qualified and eligible. On the other hand, banks may have higher maximum loan amounts but have stricter measures that may require a good credit score. If these options may seem impossible, going to a money lender is a suitable solution.

Money lenders are hundred percent safe and reliable. The Moneylenders Acts and Rules protect the borrowers by imposing a maximum interest rate, which the registered money lender should not exceed.

Who can apply for a personal loan in Singapore?
  • Age: 21 to 65 years old
  • Minimum annual income (Singaporean citizen/PR): Less than $10,000
  • Minimum annual income (for foreigners): Less that $10,000

 

Finding the Best Moneylender in Singapore

If you want to build a stable career in Singapore, you need to have a solid knowledge of the industry you want to explore. But knowing how expensive of a city Singapore is, undergraduate degrees can cause you an arm and a leg.

If you think bank requirements are overwhelming for you, getting a personal loan from money lenders is your best bet. With a handful of authorized money lenders in the country, choosing the one that can provide you the ideal loan package for your needs might be time-consuming.

Here in Instant Loan we believe applying for a loan should be straightforward and hassle-free. Take advantage of our quick and easy three-step search and application process. Allow us to gather the best quotes with low-interest rates and flexible tenors, with no hidden fees!

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