How Does A Study Loan Work In Singapore?


Key Takeaways

Study loans in Singapore offer lower interest rates and are often exempted from collateral requirements. They include the CPF Education Scheme, MOE Tuition Fee Loan, and bank loans. Each has unique repayment terms, with CPF and MOE loans providing deferred repayment options. It’s crucial to consider interest rates, loan limits, and repayment structures when choosing a study loan.

A study loan in Singapore works like a personal loan. The only difference is that it has lower interest rates than other loans. Also, the study loans in Singapore are categorised under exempted loans. Here you shall learn how does a study loan work, and the different types of study loans in Singapore.

What Is A Study Loan?

A study loan is a need and purposeful loan meant to finance a university education. Study loans come in different types based on different terms.

We have the CPF Education Scheme, Educational Loans from financial institutions or banks, and MOE Tuition Fee Loan. It’s essential when you’re looking to take a study loan, you understand how does a study loan work according to its type.

How Does The CPF Education Loan Repayment Work?

The good thing about the CPF education scheme is you can use your parent’s CPF to pay for your total course fees. You only need to start the repayment plan after one year of graduation or halt. This gives you enough time to look for work to take care of the repayments.

This scheme is a good option because the CPF Ordinary Account has one of the lowest interest rates of 2.5%. However, the interest builds up after the savings are withdrawn. It’s a great idea to start making your loan payments before your repayment period begins. It helps you save money since you’ll pay lesser interest.

Eligibility Criteria For CPF Education Scheme

To be eligible for a CPF education scheme, you should:

  • Be a Singaporean
  • Be taking  a full-time diploma or degree
  • Not taking a second undergraduate course
  • You have the required CPF OA savings, which you can withdraw
  • You’re using the CPF money to pay for yourself, your child or your spouse. They can also be your relatives as long as they are approved
  • You, as a student, are receiving a government tuition grant for your course

This scheme has the advantage of more than two people paying for the same student using their CPF monies as long as both persons use the CPF education loan scheme for the same student.

What Is The MOE Tuition Fee Loan?

MOE tuition fee loan is one of the best loans that help students in Singapore in need of help to pay for their tuition fees. The loan is available at OCBC and BDS.

This loan gives a chance to students to borrow as much as 90% of their tuition fees with no interest during their study periods. The repayment structure only starts after two years of graduation.

Like CPF, it’s best to start your repayments while still studying so that by the time repayment time comes, you’ll have a lower amount to repay and lower interest. Also, this loan can be advantageous since you can put your efforts into learning and building emergency funds when studying since no interest is forming.

Education Loans From Banks Or FIs

Typically these loans are way more expensive than the ones the government offers. You also need a guarantor in Singapore if you’re less than 21 years. Your guarantor’s income affects your loan limit.

Here are the main factors you should consider when taking an education loan from a bank:

  • What’s the limit you can borrow
  • Confirm the loan tenure and how much time you’re willing to push your payment for. Generally, the maximum loan tenure you can get is 10 years
  • It has two types of repayment tenures

The monthly rest loans, which you can make your repayments while still in school, and the interest-only loans, which you pay your loan after graduation

Generally, on the basis of how does a study loan work, interest-only loans are more expensive to pay in the long run than monthly-rest loans.

What To Consider When Taking Out A Study Loan

Based on how does a study loan work, you need to consider some factors when taking out a study loan. Understanding this will significantly help you decide to apply for a loan that’s right for you. Here are several factors to consider:

The Processing Fee and Interest Rates

Interest rates are a significant factor in consideration of a study loan. When deciding to take out a study loan, you should always target the one with low interest rates. For the processing fee, banks in Singapore charge from 1.50% to 2.50%, which can go higher with a higher loan.

Look out for promotional processing fees and interest rates to ensure you have the best loan deal. Also, be on the watch for the latest announcements from banks on the same.

Maximum Loan Amount

Depending on your degree or university, you might have to take a study loan of higher value. There can be limitations, though, when you have high expenses. Therefore, you should understand that most study loans have a maximum limit you can take.

Payment Structure

A study loan, like other loans, requires you to make a repayment. Ensure you get the loan repayment schedule before you take out one. Most study loans in Singapore have different repayment schedules; standard or deferred payments.

Standard payment works like a typical loan repayment, where you start monthly repayment plans as soon as you take out the loan. Loans with such repayments are suited for you if you’re receiving financial assistance from your family, have savings or have a side income. Generally, it’s less costly at the end of the day.

A deferred repayment structure is the common type used by study loans. This structure involves paying your loan interests during schooling but paying the principal loan after you’ve graduated and secured a full-time job. Generally, it can be more expensive in the long run, but it’s the best choice if you can’t afford the standard repayment plan.

Get A Study Loan In Singapore For Your University Studies

When it comes to the question of how does a study loan work in Singapore, the answer is mainly contributed by the type of education loan you pick. To pick a choice, you need to consider the eligibility criteria, understand the repayment method, and then know the limit you require, for example, depending on your course or university.

If you’re looking forward to joining a University, contact Katong Credit and have your loan for your tertiary education. We are committed to offering you low interest loans that will simplify your life.

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